Special protections for long tenure employees

N.S employers don’t always understand the risks when terminating long-tenure employees, warns one labour lawyer.

Long-service employees in Nova Scotia are afforded extra protections under the Labour Standards Code but – according to one labour lawyer – some employers still underestimate the associated risks.

Labour Standards Code  

Section 71 of the Labour Standards Code – otherwise known as the tenured employee rule – states that a worker with at least 10 years’ service can only be fired for just cause.

“A finding that an employer violated Section 71 can have serious consequences,” warns Alison Bird. “In addition to the potential time and cost involved in defending a Labour Standards complaint, the employer may be ordered to reinstate the employee and provide them with back pay and benefits, or to pay damages to the employee.”

Bird, a Cox & Palmer labour lawyer, says many Nova Scotia employers still choose to dismiss long-tenure employees despite the risk.

“These employers would offer the employee a severance package in exchange for a release, with the assumption that the release would shield them from Section 71 liability,” explains Bird. However, releases don’t always afford the protection that an employer might expect.

The case in question

Halifax-based Bird says the case of Demone v Composites Atlantic Limited, 2014 NSLB 163, serves as an example to employers.

“An employee with more than 18 years of service filed a complaint that he had been dismissed in violation of Section 71,” she explains. “The employee had signed a release after taking time to consider the employer's offer and receiving legal advice. In exchange for signing the release, the employee received 27 weeks of pay.”

However, despite having the hallmarks of a legally-binding release, the Labour Board found that the release did not bar the complaint because parties cannot contract out of the Labour Standards Code.

“This was a preliminary decision which only decided whether the complaint could proceed, and it did not determine whether Section 71 had in fact been violated,” revealed Bird. “Many employment lawyers and employers in Nova Scotia have been waiting to see how the complaint itself would be decided.”

The Labour Board's decision on the complaint has now been released. (Continued...)

#pb# The decision

In DeMone v Composites Atlantic Limited, 2015 NSLB 141, the board found that Section 71 had not been violated because DeMone's position had been eliminated due to the employer's restructuring.

“The permanent lay-off of an employee as a result of the good faith elimination of an employee's position is a well-established exception to Section 71,” explains Bird, adding that the this aspect of the decision doesn’t change the applicable principles in assessing a Section 71 complaint.

However, the board also reconsidered the previous decision in regards to the legality of the release – this time, it concluded that the complaint could in fact be barred.

“This was based on the board's finding that Section 71 was not violated because there had been a good faith elimination of DeMone's position,” explains Bird. “As DeMone had received his statutory entitlement to 8 weeks' pay in lieu of notice and an additional 19 weeks' pay, DeMone had received a benefit that exceeded his entitlement under the Code.”

Disappointingly, the board declined to decide whether a release is binding if an employer is unable to prove than an employee was only terminated due to their position being eliminated.

“There is now no clear statement from the Labour Board that a release will not bar a Section 71 complaint,” stresses Bird. “Instead, it now seems that a release likely will be enforceable in circumstances where an exception to Section 71 applies.

“However, there remains significant uncertainty regarding whether a release will bar a Section 71 complaint in circumstances where an exception to the provision does not apply,” she continues.

“Accordingly, given the significant risks of a Section 71 complaint, employers in Nova Scotia would be well-advised to seek legal advice before dismissing an employee with more than 10 years of service.”

Read Alison Bird’s full article here.

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