Should You Provide Job Search Assistance and Reference Letters to Employees that You Terminate Without Cause?

I always counsel employers that it is best to help employees with their job search if employers need to terminate them without cause.  The reason for this is an employment agreement is a contract.  Employment law isn’t simply govern by legislation by it is govern by common-law, and contract law is made up of a century of common-law.  If the contract is severed, damages must paid.  Damages are in the form of wrongful dismissal damage, which is essentially payment for breach of contract.  Therefore, if there is a breach of contract than damages must be paid and mitigation is extremely relevant.  Mitigation is basically an employee’s effort to look for new employment, in order to mitigate their damages.  Therefore, if you provide job search assistance through the payment or contribution to an outplacement service or a job search service the employees may take advantage of this and try to use the services to get on with their careers.  It is an incentive for employers because if the employee, in essence, finds a new job early on than the damages paid through lump sum or salary continuance will obviously be lessened.  In short, the faster a terminated employee mitigates his or her job loss, the less the employees claim for wrongful dismissal will be worth.  Also, it will show good faith on behalf of the employer, if the employer helps the terminated employee in searching for new employment.  Lastly, the issue of mitigation can easily be brought up at an examination for discovery, given that the outplacement service was offered to that terminated employee.  A strong defence around the employees failure to mitigate can be built.

With respect to reference letters the same theory applies.  If you assist your terminated employees in finding employment then the less the employees wrongful dismissal claim will be worth.  The problem is obviously the administration process in larger corporations.  You will have employers and human resources personnel answering the phone that are not familiar with the employee.  However despite this, it is always a good idea and widely accepted practice that an employer provide a reference letter to an employee in order to guard against any bad faith claims and it also helps build a mitigation defence.  The best idea is to provide a scripted letter of reference and scripted answers with respect to any questions asked about any employee that is terminated.  The employer has an obligation to be honest however, not defamatory.

Unfortunately, our courts have negatively remarked on defendant employers who had refused to provide terminated employees with reference letters.

Therefore, yes provide an outplacement service opportunity for your terminated employees.  The cost will be minimal and it will benefit the company if a wrongful dismissal suit is issued.  Also, provide a scripted reference and scripted answers to questions that are neutral if you are unsatisfied with the employees performance, or if you are satisfied with the employees performance and the termination was simply due to downsizing.

If you have any questions, please do not hesitate to contact me.

If you would like a refernce letter template, please call me to set up an appointment.

Matt R. Lalande
Hamilton Employment Lawyer | Mississauga Employment Lawyer | Burlington Employment Lawyer