Terminating a senior executive is no easy decision and if done wrong companies can open themselves up to serious financial exposure, warns one employment lawyer – here’s what you should consider.
“Twenty four months has generally been considered to be the upper limit for reasonable notice of termination without just cause,” says James Casey – but there are exceptions to the rule.
“In a recent Ontario case the Court awarded a relatively short-term employee damages in an amount equivalent to 30 months’ salary and benefits,” he revealed.
William Kilpatrick had worked as the CEO at Peterborough Civic Hospital for just six years when he was terminated but it was his own employment history – and the nature of his recruitment – that made an impact on the court’s decision.
While Kilpatrick had only been on board for six years, the hospital had actively recruited him from his previous position at Moncton Hospital – where he’d worked happily and successfully for 29 years.
To add to that, Kilpatrick’s new employers convinced him to relocate and led him to believe the role would be secure in the long-term. Instead, he was forced back into the job market after just six years, where chances of obtaining a similar position were slim.
“There are two important lessons for employers from this case,” says Casey. “Firstly, employers are reminded that improper terminations carry with them the risk of huge financial losses.”
The Field Law partner says any employer considering dismissing a high-level employee should meticulously plan any termination and seek appropriate legal advice before proceeding.
“Secondly,” continues Casey, “an employer's financial exposure from a termination is much larger where an employer utilized a ‘headhunting’ approach and convinced an employee to leave their current secure, long-term employment.”
Prevention over cure
“The easiest and most practical method by which employers can manage the financial risk of termination is by utilizing written employment contracts with their employees,” says Casey, drilling in the old adage.
“’Reasonable notice’ of termination is generally only required where there is no employment contract which specifies the amount of notice or severance pay upon termination,” he explains.
“Peterborough Civic Hospital would have avoided the damage award of 30 months’ salary and benefits if it had agreed with Mr. Kilpatrick prior to his employment on the amount of severance to be paid in the event of termination.”
Read Casey’s full article here
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