Last week’s round of layoffs at IBM Canada should serve as a reminder for IT professionals: get up to speed on employment law.
With layoffs seen at pretty much every major tech company across the country, legal experts are advising that employees understand what they’re entitled to under the law and in what circumstances they should fight for more cash in court.
Employment law in Canada is governed at the provincial level with very minor differences in each piece of legislation. With IBM Corp.’s Toronto and Markham, Ont. area offices appearing to be the hardest hit in Big Blue’s latest round of cuts, we’ll use Ontario’s employment legislation as an example.
Under Ontario Ministry of Labour’s Employment Standards Act, workers are entitled to one week’s notice (or payment in lieu of notice) per year of service, up to eight years.
Workers employed more than five years will most likely be eligible for an additional severance package, consisting of one week’s pay per year of service, up to 26 weeks. This comes into play if the company has laid off 50 or more employees within a six-month period or if the employer has a total payroll of over $2.5 million.
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This puts the employer’s total responsibility under the act at a maximum of 34 weeks.
According to Martin Rosenbaum, a lawyer with at Toronto’s Rosenbaum & Frank LLP, while these packages represent the absolute minimum that a company is required to offer an outgoing employee, they are far from acceptable in most cases.
“It’s very dangerous to just call up the Ministry of Labour,” he said. “They will only give you the minimum and have no idea what kind of settlement you could get in court.”
Stacey Ball, an employment lawyer at Toronto-based firm Ball & Alexander, agreed, saying that for many laid off workers, taking the issue to court is only option for a fair settlement.
“One thing we should be aware of in Canadian jurisdictions, unlike in the U.S., is we’re entitled to common law notice or payment in lieu of notice,” Ball said. This would be awarded in a provincial court and will exceed the Employment Standards Act quite significantly, he added.
“If you have someone who’s worked for over 20 years, it might be possible for the court to award them up to 24 months pay in lieu of notice,” Ball said. “The Employment Standards Act would only give them eight weeks notice, plus statutory severance in the case of a large company like IBM.”
In IBM’s case, Ball said a lot of people in the company get paid north of $50,000 a year, and would advise those laid off workers to seek counsel before signing off on any package Big Blue dishes out.
“It’s worth it just to see if IBM is in the ballpark,” he added.
According to most legal experts, employers will often play the numbers game and offer a package that is above the provincial legislation, but below the common law precedents.
When a severance package is offered, employees who don’t want to initiate a lawsuit might consider sending a letter to their company trying to negotiate a better settlement. This will often work if both parties are fairly close to a middle ground.
“The problem with this is if the employee does it themselves,” Howard A. Levitt, counsel at Toronto-based Lang Michener LLP, said when asked generally about employment law. “What the employee is telegraphing is that ‘we don’t want to pay money for legal fees.’ The company will get that message and just stick with their offer.”
For companies that might have had massive layoffs occur during the last economic recession, employees should not count on receiving similar packages this time around.
“It’s totally irrelevant,” Levitt said. “Just because a company low-balls an employee at one time, doesn’t mean the company is going to pay less to a future employee. And similarly, because a company pays more than they have to in one instance, it doesn’t mean a court is going to make them do the same in the future.”
Another common element of a severance contract is a non-competition clause that seeks to restrict an employee’s ability to work for a competitor in the same industry.
“If you don’t already have a non-compete clause, why would you sign one on your way out when you need the ability to compete the most?” Levitt said.
For employees looking to change career paths after a layoff, signing a non-compete clause can be a good thing, but only if you negotiate more money in return for your signature, Levitt added.