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A Chilling Effect in Employment Law
Adam Kowalsky
Adam Kowalsky

Litigation is used to obtain a remedy against a person (including a corporation) who/that has wronged you. It is a way to pursue justice when being dealt with unfairly or illegally. One common area of litigation is in employment law. Employment law exists to protect the rights of employees and employers in a non-union context. Most employment law suits are by employees against employers for wrongful dismissal when the employee is fired unfairly. If an employer wrongfully dismisses an employee, meaning that they have fired the person without good cause or reason, leaving the person without income, it is open to the employee to sue the employer in wrongful dismissal who may, if successful, receive monies from the employer that are equal to the amount the employee would have earned if the employer had supplied a proper notice period before the dismissal. There is no law against dismissing an employee, but it must be done fairly and with proper notice. A basic rule of thumb in determining what the proper notice period should be is one month's pay for each year of service of the employee. There are factors that can influence this, increasing or decreasing the amount payable. Typically, when an employee is dismissed, that person obtains, employment insurance (EI) to survive economically, since their employment income has been reduced to zero. The dismissed employee may also choose to sue the employer for wrongful dismissal, especially if the dismissal was unfair or unjust. Usually the law suit is not completed until the employee's EI benefits have expired, or, the person has returned to work elsewhere. Until recently, assuming a successful suit, the amount of money received through EI benefits would simply be added to the amount won in the suit, and the combined amounts would be taxed as income in the hands of the employee. There is an element of double dipping in this arrangement as the employee both receives EI benefits and money from the law suit, covering the same or part of the same period. This was never actually allowed, but the government has clamped down recently. Employers are required by law, after a law suit is won by an employee, to obtain from the employee a statement from EI about how much money was paid by EI to the employee, the whole amount paid by EI is deducted from that person's damage award! This can represent many thousands of dollars paid back to EI. Add to this the income tax deduction taken by the employer (required by law) on the damage award, and the legal fees involved in the suit, and the employee may receive relatively little money compared to the amount of the award a big disappointment! This collecting back of EI benefits by the government will have a chilling effect on wrongful dismissal suits for low income earners as it is simply not worth the risk of a suit. In my opinion, there is an element of justice lost because of this. Higher income earners and/or long term employees, however, may still benefit from making the suit. Bryan Embree is an associate at the law firm of Cobb & Jones LLP

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