These are the 10 biggest mistakes employers make

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What are the biggest mistakes employers make? I could write five columns about this and list the 10 most common mistakes in each one. But let’s pick a few:

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1) Being too generous with your initial severance offer

In an era when employment lawyers tout big benefits to every laid-off employee, few are willing to accept their employer’s first severance offer. But many employers, fearing litigation, are quick to cave to demands for a better package, even if their first offer was reasonable. To avoid this trap, employers should make a lower first offer to give themselves room to negotiate.

2) Being too reluctant to litigation

Employers hate litigation, but employees hate it even more. For both, it is a huge waste of energy and money that could have gone to the employee but ends up in the hands of the parties’ lawyers. Understanding the general futility of litigation, many companies quickly pay what they think the case might be worth when there is a threat of litigation, sometimes even more. But the value of a case is never known at the outset, as its value is reduced if the employee mitigates the problem (i.e., gets another job). Furthermore, employees often lose interest in their case or the will to fight. Employers who quickly pay a lot to those who threaten litigation soon end up paying much more than they should to everyone else, too.

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Some clients take the opposite approach. They pay a reasonable amount, close to the lower end of severance pay, and if an employee files a lawsuit, they stand their ground. They may end up paying more in that particular case, including legal fees, than they should have. But the employee also ends up dissatisfied because, after paying their own legal fees, they end up worse off than if they had accepted their first offer. And then word quickly spreads that it’s worth it to accept that employer’s initial offer and avoid litigation. That will save a lot of money.

I had a client who bought a company in one of the Maritime provinces and laid off about 50 employees. Twelve of them hired lawyers who wrote demand letters. Eleven of them dropped their cases on the spot without being offered any additional amounts. Only one went to trial and recovered less than $20,000. But the trial judge made a mistake, so I appealed and reduced it by another $3,000. The fees to go to appeals court were obviously much more than the $3,000 reduction. But for the employee, it was a financial disaster.

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For many years, no employee at that company filed any further lawsuits, even though there were many other dismissals with severance offers lower than what a court would have offered. Everyone paid attention to how the company had handled its litigation.

3) Offering too little

If you offer an amount that is patently unwise when an employee is entitled to much more, you are encouraging him to sue, and he will, and you will lose. Plus, you have lost credibility with the employee, so when you increase your offer, the sky, in the employee’s mind, becomes the limit. The case then becomes very difficult for that employer to resolve.

4) Relying on compensation formulas

There is no compensation formula or calculator that accurately represents what a court will do. No month per year of service and no algorithm will replicate the decisions of the A judges. Formulas and calculators invariably overpay some employees and underpay others. An employment lawyer, looking at the basic factors of age, seniority, position, and compensation, along with information about any extraordinary factors affecting that employee, can provide a reasonable estimate of what a court will do, and then the company can discount that amount as it wishes.

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5) Waste of legal resources

Legal advice is only as good as the client’s opinion. If clients have no idea what is relevant, they will not only waste legal fees, but will cause their lawyers to pursue useless solutions and overlook theories that would have been useful.

Largely as a lesson for future work from a client who had such tendencies, I reviewed material sent to an associate for the purpose of drafting a statement of defense and literally edited 90 percent of it, leaving only what was relevant and helpful. The excess information was a waste of the client’s legal fees. More importantly, if the client had so little understanding of what was relevant, there was a risk that he would leave out issues that would have been very helpful to his case. It is important for the attorney and client to get together and discern which facts might be helpful, which might be damaging, and then focus on those, largely ignoring the excess.

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6) Condone bad behavior

If you have reasons, fire. Don’t delay, don’t give a review that’s better than a disjointed review, don’t give a raise, and don’t give a positive reference after firing the employee. All of these acts could vitiate any chance of you asserting your reasons in the future.

7) Hiring external researchers

Too many companies pay $100,000 or more to investigate whether misconduct warranted termination when the employee could have been fired, without cause, for less than you just paid the investigator. And the court doesn’t care about the investigator’s opinion. The judge will draw his or her own conclusion after hearing from witnesses directly. The investigator’s report is hearsay and inadmissible. And the law is clear that in almost all circumstances, no investigation is legally required. If the employee committed a justified act, the employer will be successful even if it did no investigation and asked no questions. If you’re going to conduct an investigation of anyone beyond the CEO, have an internal employee do it quickly at no additional cost.

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8) Having favorites

Too many employers have employees whom they treat as favorites and others whom they do not like, sometimes for good reasons, sometimes not. They make a mistake when they too quickly assume that those they favor are telling the truth and overlook conduct they would not tolerate in others. Such differential treatment not only leads to mistakes and morale problems, but it creates precedents that make it impossible to fire others for a deserved cause of the same nature.

9) Inadequate research

If you’re going to fire or even discipline an employee, do your homework. Get their side of the story and make sure your case is strong. Don’t let emails you didn’t review out of laziness or carelessness later turn up in the employee’s hands and undermine your theory of the case. Review everything ahead of time so you can go into the meeting with the employee fully prepared.

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10) Not reviewing your employment contracts

This area of ​​law changes so rapidly and the courts are so favourable to employees that employment contracts that were enforceable last year are probably no longer enforceable. Employers should review their contracts periodically to ensure they provide for things like constructive dismissals, redundancies and anything else they may wish to be able to do but can’t without a contract.

Howard Levitt is a senior partner at Levitt LLP, an employment law firm with offices in Ontario, Alberta and British Columbia. He practices employment law in eight provinces and is the author of six books, including Law of Dismissal in Canada.

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