If you do hire one, closely examine your legal bills and do not assume they are reasonable

A decision just issued by Ontario Superior Court Justice Robert Centa made that point clearly.

The case involved a 22-year-old associate advisor with a financial services company who had worked for less than three months at a salary of $28,002 per annum, when he was terminated. Should someone of that age, income and length of service ever sue for wrongful dismissal? At most, I would say, they should be advised to use small claims court. What would that case be objectively worth? Absent extraordinary factors, $5,000 on a good day.

At his own initiative, the employee had filed an Employment Standards Act (ESA) claim with the Ministry of Labour. It denied his claim for termination pay because he had worked less than three months but awarded him $100 for “reprisal” based on the employer’s suggestion that he would not receive a positive reference if he filed his complaint.

Employees should note the small amounts awarded through the Ministry of Labour and approach that remedy cautiously.

Many employees believe that they can file an ESA claim, quickly get the few weeks pay the ministry provides and then sue for up to 30 months in court. They cannot. Filing the ESA claim precludes you from later suing for wrongful dismissal, unless you withdraw the claim within two weeks.

While proceeding through the ESA, the employee contacted a law firm which nevertheless advised him to finish with ESA and, if dissatisfied, then sue, advice the judge found was difficult to reconcile with the ESA regulations.

After the firm sent the employer a demand letter and filed a mislabelled claim for more than $70,000 that it later abandoned, the relationship soured and the client fired the firm, which still sent the employee a bill for more than $25,000.

In reducing that bill to $2,000 Justice Centa made many comments of interest to employees, particularly those who are lower paid.

The court pointed out the onus is on a lawyer to defend the reasonableness of their account and in any dispute, the lawyers working on the case should personally testify, a strong disincentive for a law firm to sue for any bill that is not significant.

The court also disallowed numerous charges, including time docketed after the employee terminated the relationship, charges for the firm’s receptionist at $200 an hour and costs related to drafting a standard form retainer. It had also charged for time spent fixing the mislabelled statement of claim, which was also disallowed.

The moral for employees — closely examine your legal bills and do not assume they are reasonable.

“Stepping back, it is unreasonable to docket 66.5 hours on a straightforward employment law dispute for a young, short-term employee with a fairly low salary,” Justice Centa pronounced, expressing difficulty understanding what value the client received from most of the activity docketed.

“Experienced employment law counsel would understand the importance of a streamlined and efficient deployment of time and energy to advance this (small) claim. It is difficult to see how this claim could ever have justified $25,000 in time before the defendant even delivered a statement of Defence.”

Many employees do not understand that they are not required to pay legal bills based on the time the lawyer spends if there is little value in that time. You should hold your lawyer accountable for the value they are receiving for that time.

By the time this matter reached court, the employee had settled with the company directly for $15,000 — an amount far in excess of what I would have recommended if I had been acting for the employer, particularly with the ESA defence which should have resulted in the employee recovering nothing at at trial. And even without that defence, his case was worth much less than the settlement.

Lawyers are supposed to look at the value of a potential claim when rendering any account.

A factor in determining the appropriateness of any account is also the client’s ability to pay. In this case, the employee lived at home supported by his parents, had no savings, had over $80,000 in debt and earned only $13,800 in the next two years following dismissal, factors that also went into the court’s decision to reduce the account. Lawyers are required to look at each client and determine how much that client can actually afford before proceeding.

The court noted that this client received no interim accounts showing the bills he was accruing and so, when he terminated the retainer, he did not knowingly assume the cost the lawyer then billed.

Dismissed employees are now wooed by considerable legal advertising. This case started as a contingency arrangement. If the case had proceeded, given the amount actually at issue, it is likely he would have ended up paying his employer’s costs — and no contingency arrangement can protect against that.

Unsophisticated clients should not credulously trust their law firms but apply due diligence before considering whether to sue, however seductive the lawsuit presented may appear.