How to settle wrongful dismissal


You’ve been fired. You’ve looked into your options for reinstatement. You’ve received a termination package equal to or somewhat better than the minimum Employment Standards or Canada Labour Code requirements.

First, this decision should be made with the help of a lawyer or someone else with expertise in employment law. But before you make that decision, let’s talk practicalities. If you do sue, be prepared for the fine print – the deductions that will be made to any settlement or court award.

The first deduction is, of course, for income tax. Most wrongful dismissal settlements or judgments are fully taxable and tax is withheld and remitted by your former employer.

The second deduction is reimbursement for any Employment Insurance benefits you’ve received for the period covered by the settlement or judgment.

The third deduction is the payment of your legal fees.

Last is the deduction for any earnings you’ve obtained during the time period to which the settlement or judgment relates.

I’ve seen many plaintiffs become disappointed when they realize that even if they win they will be left with little or nothing to show for their efforts.

Of course, these deductions don’t mean you should never sue, but you should go forward with a lawsuit with full knowledge of what you might net when the lawsuit is over. Before you sue or decide on whether to accept a settlement offer, make this calculation yourself or get your lawyer to walk you through it.

There’s no point in pursuing a lawsuit or continuing a lawsuit if the lawyers will be the only victors.

Also, before you decide on a lawsuit be realistic. If your claim is realistically for $10,000 or less then you can sue in Small Claims Court. You might be able to handle the case yourself with a little up-front help from a lawyer.

If your claim is realistically for something minimally over $10,000 you can waive the excess and still proceed in Small Claims Court. The amount you waive may be more than made up in the money you save in legal fees and the speed in which your claim is resolved.

If you have a claim beyond the jurisdiction of Small Claims Court but the claim is under $50,000 you can start a “simplified procedure lawsuit.” A simplified procedure lawsuit will usually require a lawyer but the costs of the lawsuit will be dramatically lower as there won’t be any expensive examinations for discovery. These are the pre-trial interrogations that take place in actions where an amount in excess of $50,000 is claimed. Also, you are likely to get the lawsuit resolved much faster if you are in a simplified procedure lawsuit. In other words, be realistic and don’t be a dreamer.

Before you consider a lawsuit insist that your lawyer thoroughly explore the potential for settlement. Failing settlement, perhaps the dispute could be resolved through mediation. If both sides agree, there is nothing to prevent resolution of the dispute without having to start a lawsuit.

My experience is that the majority of wrongful dismissal lawsuits are resolved through mediation, particularly when you use one of the top employment law mediators. Every employment lawyer knows who the top mediators are and getting a resolution through mediation can be fast and inexpensive. Not every dispute can be resolved quickly and inexpensively but that’s no reason why this goal shouldn’t be pursued.

Department of Embarrassment: In my last column I explained the duty to mitigate losses and seek other employment if you are fired. I gave an example of an individual obtaining a court ruling awarding a 12-month package worth $75,000 where the individual has earned $25,000 during the 12-month period as mitigation earnings. The court will deduct the $25,000 from the $75,000 leaving a net award of $50,000, not $75,000 as I wrote in my last column. My apologies to anyone I confused.