It is possibly the biggest loophole in workplace law: corporations terminating long-term employees and providing them with only the bare minimum severance. While it is not technically illegal, these former employees are clearly being exploited. But after a recent Ontario case, that loophole may have just been closed.
Luis Romero Olguin came to Canada in 1979 and started work for cabinetry maker Canac Kitchens shortly afterward. When Canac recently closed its Canadian plant, Olguin, at the age of 55 and after 24 years of service,was terminated as part of a mass layoff. Canac deliberately provided Olguin with only the minimum severance and benefits required by legislation, aware that this was considerably less than the “fair” amount that courts oblige employers to provide based on their age and service.
Shortly after his termination, Olguin was diagnosed with throat cancer that prevented him from working. He sued Canac in a claim that took nearly five years to reach trial, a fact not lost on the judge who referred to Canac’s decision to litigate its many disputes with its former long-term employees.
According to the court, Canac was required to “make Olguin whole” after termination, which means it had to continue his salary and benefits for a reasonable period of time. Instead, the judge noted that Canac “chose to go the bare minimum route,” consciously providing just the “minimums in pay and benefits” and gambling that Olguin would stay well.
Olguin was awarded damages in the hundreds of thousands for lost disability benefits on top of wrongful dismissal damages for the lack of fair severance. The court then denounced Canac’s “hardball approach,” in consciously paying Olguin just the bare minimum, by awarding him punitive damages, usually reserved only for outrageous employer misconduct.
Too many companies have a practice of paying only minimal severance, which forces dismissed employees to sue them for what is fair. I have a number of these cases. The employers are aware of the obstacles this poses for employees and, until now, have been able to exploit them. In light of this precedent, employers must now think twice about paying only the minimum or risk paying additional damages far in excess of the original claim.