The Catch-22 of Offering Severance Terms

by Darcey Quigley on December 5, 2012

  • SumoMe

Terminating an unsatisfactory employee is always an affair wrought with emotion and unhappiness. Even if there is just cause to let the employee go, or if there is reason to believe the employee is just as eager to part ways as the employer, there is natural suspicion and hard feelings immediately – and often long before the final meeting. Employees may feel they are being unfairly let go, and employers are always worried about unfair termination claims, and these combine into a too-frequently acrimonious environment.

That labour laws need some revision is generally agreed upon; it was disappointing to learn that the government had tabled an amendment to the Enterprise and Regulatory Reform Bill recently that would have addressed the unfortunate situation regarding severance offers – it would have been a giant step in the correct direction for Scots Labour law.

Currently, employers are caught in a Catch-22: They may sincerely desire to treat an employee fairly and make an offer of severance in an attempt to terminate the employee without rancour and perhaps offer them what they feel is a suitable reward for loyal service in the past. However, simply by making such an offer and explaining to an employee the reason behind their intended dismissal, under current law they will have undermined their implied duty to maintain the employee’s trust and confidence. In effect, any attempt by the employer to be up-front and reasonable immediately gives the employee cause to file an unfair termination claim, citing the implied duty.

On its merits almost everyone can agree that this is an unreasonable situation. The proposed amendment was designed to get everyone into a more reasonable place by allowing for a larger proportion of privately negotiated severances. In many cases an employee may be amenable to termination, or acknowledge that their performance was unsatisfactory or that other issues make their termination reasonable. If employers were comfortable in making fair severance offers and explaining their reasons, a large proportion of unfair termination claims might very well disappear immediately.

In the current situation, merely broaching the subject of a fair severance settlement or raising the issue of unsatisfactory performance leaves the employer vulnerable to a claim. Even reasonable employees who have no other reason to lay a claim against their employer may be persuaded to do so in hopes of gaining a settlement larger than the severance, or perhaps in retaining their employment. This is an intolerable situation leading many employers to simply terminate their employees without making any attempt to explain or negotiate, and spurring those employees to clog the courts with termination claims. Since employers assume any attempt at a dialogue with employees will result in a claim in any event, there is little motivation to attempt a negotiated exit.

The proposed amendment would have addressed this problem by making such conversation partially protected, making such overtures inappropriate as the basis for an unfair termination claim – meaning that employers could not be held to have violated their implied duty to maintain the employee’s trust and confidence simply by detailing unsatisfactory performance and offering a severance settlement. The amendment made it clear however that such conversations could still be used as evidence in a claim if it was appropriate to do so. This would allow employers to give employees clear facts concerning the reasons behind their termination without fear of such communication serving by itself as cause for a claim, while employees who are in fact unfairly terminated could still use such a conversation as evidence if necessary. There would also be a consideration for “improper behaviour” during such a conversation which would remove its protected status, though what, exactly, would constitute “improper behaviour” is vague and needs to be improved in the language of the amendment.

This sort of revision is necessary and long overdue. The hope is that it is reintroduced soon and, with slight improvements, passed quickly. Both employers and employees will no doubt welcome the ability to safely and calmly negotiate future severances.

Mark Darcey is the owner and director of Darcey Quigley, an independently owned company specalialising in debt recovery in Scotland and across the UK

Darcey Quigley

Darcey Quigley

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