Howard Levitt: Three different judges can come to three different decisions respecting severance on the same set of facts

How much severance are you entitled to when you are fired? By now, everyone knows it is not the limited amount in various provincial employment standards acts and, while employers purport to be more generous than those acts require when they are making a severance offer, they are being deliberately misleading.

Myths abound. One month per year of service, two months, two weeks, or the amount in the company‘s policy manual, etc. None of those have any relation to reality.

Many employees turn to severance calculators, but they only provide, at best, a starting point toward a rough calculation.

Since these calculators, including my own, are only based upon a few factors and the significance of those factors can be dramatically different or emphasized differently by the judge in particular cases, those calculators are often misleading. As well, there are many factors relevant in particular cases which are not considered in these calculators.

In my book, the Law of Dismissal in Canada, I cite over 150 factors courts consider which could ultimately impact on what is awarded. And there is no perfect precise number for severance.

Too often we forget that judges are people too, and therefore influenced by the “justice“ of a case. If the judge considers the employee a miscreant, a saint or the employer deserving of punishment, that will ultimately impact what is awarded. And there is no precise number. Three different judges can come to three different decisions respecting severance on the same set of facts.

Given that judges are people, it is critical that a narrative is created to put your client in the best possible light and your opponent in the worst. That narrative is constructed from the first meeting and develops during the many stages of the case itself. Storytelling, constructing the best narrative from the facts, is a very important skill in any litigator. That requires a combination of intuition, imagination, experience and knowing the law in such detail that you know immediately what previous cases to bring into yours. Sometimes there are angles to argue from previous cases, which maximize the client’s return, while opposing counsel will have no idea why you are taking that position.

One problem with my bar is it is filled with novitiates and people trying to get into the area, considering it generally lucrative compared to other areas of the law.

Unfortunately, too many people who call themselves employment lawyers have never seen the inside of a court room at a trial. Realizing their lack of skills, they collapse like a bad suit if you ever threaten to go to trial. I hire experienced litigators for that purpose. Another reality is that too many lawyers attempt to settle their cases with little work after a quick mediation for only 75 or 80 per cent of its value.

This is particularly true for contingency lawyers looking to maximize their return for as little work as possible. It is not in their financial interest to perform the last intensive work to get that last 20 or so per cent of the entitlement, which the company will resist the most. It is for that reason that a reputation for tenacity, fighting all the way and appealing as necessary will get much better settlements than if the employer’s counsel is facing a lawyer with a reputation for never going to court, which is the case for much of my bar.

When we discuss severance, I am not referring to months of salary alone. Employees are entitled to everything they would have earned if they had worked for the number of months awarded. That includes the company’s cost of benefits, bonuses, commissions, long-term incentive plan (LTIP), stock options — everything whatsoever. I have cases where employees were terminated months or even a couple of years before their pension would have fully vested or when they would have been paid a change-of-control bonus. Those particular entitlements are often worth more than the months of severance pay, sometimes vastly more.

In the most recent of my cases before the Supreme Court of Canada, more than any other employment lawyer, the employer had a contract, strongly worded, depriving my client, Dave Matthews of any LTIP that would accrue after his termination. The Supreme Court set that contract aside, saying it did not contemplate the actual bad faith circumstances of his termination and was not sufficiently worded in any event given that such contracts must be interpreted strictly against employers.

Even though the event, which resulted in the $1,100,000 LTIP, occurred close to a year after his dismissal, since the court awarded him 15 months, which would have taken him beyond that date, the Supreme Court awarded it.

Since he obtained a job shortly after his constructive dismissal, he had virtually no other economic loss in the form of salary and benefits. Therefore, the LTIP award represented virtually the entirety of Matthews’ case. That shows the importance of knowing when a case should be appealed because the decision is one that an appellate court will overturn. That also takes experience and knowledge of the law, as is getting before the Supreme Court where you have to convince them that your case is a matter of national importance. Matthews was from Nova Scotia, was represented by other counsel and that counsel approached me to handle the Supreme Court appeal. The reality is that about 90 per cent of severance offers are less than an employee’s legal entitlement and most employers make offers expecting some negotiation.

At the end of the day, if an employee pushes for more, the employer makes a business calculation. They analyze their employee and their view of that employee’s tenacity. They also look at who the counsel is and whether that counsel is someone to be feared.

Does that counsel have a record for success at trial as opposed to settling along the way and taking a discount? The employer knows one thing with certainty: If the employer is owed more money if the matter reaches court, at the end of the day, the employee will still be awarded that extra money, but the company will also be saddled with a portion of the employee’s legal costs and 100 per cent of its own.

Although the employer may try for a little while to see if the employee backs down and accepts, say, a smaller amount, the economic reality will determine, how far they actually go. It is almost never worth it for an employer to go to trial on a case only about the amount of severance if they believes that the employee won’t back down and more is owed.

Virtually all employees want their cases settled as quickly as possible and few actually want to go to trial. The reality is that, for the reason just provided, less than 1 per cent of cases actually get there. If the employer believes that the employee is desperate to settle, its offer will be less and settlement becomes less likely. The job of good employment counsel is to stiffen their client’s resolve so as to go as far as they have to until their full entitlement will be obtained. If the employer believes the employee and their counsel won’t back down, that is when a settlement will be obtained.