Howard Levitt: How a hot job market is giving companies cover to fire costly older workers

Given that Canada’s jobless rate hit a record low in March and employers are now scrambling to find anyone to fill open positions in virtually all sectors of the economy, one might justifiably think that terminations are no longer a major topic of conversation. Surely, employers are desperately hanging on to their existing employees just to keep warm bodies in seats and their businesses chugging along? Not so, it turns out.

Since the pandemic began, most employers have learned to find ways to save money. In what is doubtless a product of those efforts, we are seeing a rash of terminations of mid- and upper-level employees, despite the apparent shortage of available talent today. From an employer perspective, there is no better time to terminate than when the market is white hot and there are more jobs available than people to fill them.

However, this isn’t the end of the story. In this effort to save costs, we are seeing companies use the current job market by increasingly targeting employees whose salaries are on the higher end of the compensation spectrum for their positions. Often these employees have been with the company for decades, working their way up through the company ranks, with salary increases and promotions over the years, which have effectively priced them out of the market.

Companies increasingly targeting employees for termination whose salaries are on the higher end of the compensation spectrum for their position.In evaluating the rights and entitlements of these employees, we usually start by reviewing their employment agreements. Often these longstanding employees have either no contract at all or a brief letter of engagement which contains none of the detailed, negotiated termination provisions one would expect to see in today’s contracts.

Also, their positions may have changed so significantly during their time with the company that whatever contract does exist is no longer relevant to what they currently do. Even the more robust contracts rarely have termination provisions that survive the recent court decisions which have effectively turned severance entitlements from weeks into months by rendering language which tried to limiting severance amounts to Employment Standards Act minimums invalid.

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Job openings hit new records, while 4.5 million Americans quit or changed jobs in March, reflecting labor market strengthWhile workers continue to feel emboldened to freely switch jobs, they may not quite have the leverage they did even a few month ago.
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