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Why so many claims settle | Stuart Rudner

Wednesday, June 16, 2021 @ 8:50 AM | By Stuart Rudner


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Stuart Rudner %>
Stuart Rudner
We know that only a tiny percentage of claims filed make it all the way to trial; I have always understood that it is less than two per cent. So why is it that so many cases settle before trial? Cost is often a big factor, but in many cases, it comes down to a decision between a known outcome that the parties can control vs. an unpredictable judgment sometime in the future.

As a mediator, I always tell the parties that settlement only makes sense if it beats the alternative, which is continuing with litigation. By resolving the matter at mediation, the parties obtain certainty: they know how much they will pay or receive and when. They can also be more creative with the allocation of damages, which can benefit both parties, and avoid the unnecessary expenditure of time and resources on litigation. Furthermore, for employers concerned about setting a precedent, a confidential settlement at mediation can have significant appeal versus the risk of a public decision which opens the door for future judgments against them.

Furthermore, they avoid the uncertainty. It is often that last point that becomes the most important one: while the potential resolution is unlikely to be everything that they hoped for, it is far better than an outright loss at trial, which is often a possibility. After all, while you might think that you should be entitled to 22 months of pay in lieu of notice, if you are facing the possibility that you might get nothing, or something more like 14 months, then a settlement of 15 months at a relatively early stage may make sense. Often, the result will depend on which judge is assigned to your case: the judicial version of “rolling the dice.”

You might think that employment law would be relatively settled by mid-2021, but if anything, it has become less predictable in recent years. We were used to uncertainty regarding issues such as notice periods, post-termination compensation and, in recent years, the enforceability of termination provisions.

Now we have the threat of a deluge of constructive dismissal cases based upon the fact that hordes of employees were temporarily laid off as a result of the COVID-19 pandemic. We now have the first two decisions in Ontario (Coutinho v. Ocular Health Centre Ltd. 2021 ONSC 3076; and Taylor v. Hanley Hospitality, 2021 ONSC 3135) as to whether unilaterally placing an employee on temporary layoff / Infectious Disease Emergency Leave constitutes a constructive dismissal pursuant to common law, and although those decisions were rendered within weeks of each other, they reached diametrically opposite conclusions.

While many people have strong opinions as to which is right, the only one that really matters will be the last judge or panel of judges to opine on the issue. For now, all the employees and employers involved in these disputes are in a complete state of uncertainty.

This is frustrating for counsel but far more upsetting for clients, who may be litigating their livelihoods and forced to proceed when there is no clear answer as to whether or not they will be successful.

The other current wild card is the enforceability of termination clauses. Interestingly, before the infamous Waksdale v. Swegon North America Inc. 2020 ONCA 391 case, I had a few mediations in which the issue of whether unenforceable termination for cause provision would render the entire termination section unenforceable was prominent. At that time, the state of the law favoured the employer. However, whether or not you agree, the Ontario Court of Appeal has dramatically changed the landscape. In some cases, it comes down to timing; employees who brought such claims two years ago may have settled for far less than they would now.

Of course, the perennial source of uncertainty in the world of employment law is the assessment of common law notice periods. While some have asserted that we should have legislatively defined notice periods and remove this notion of “reasonable notice” altogether, I have yet to see a viable solution that would take into account all of the factors that should be considered. Of course, it is open to the parties to enter into a binding contract with an enforceable termination clause that clearly sets out what the individual will be entitled to in the event of dismissal.

The reality is that the world of employment law is even more uncertain at the moment than it has been, and that creates even more incentive for parties to engage in meaningful settlement discussions and reach a resolution rather than rolling the dice at trial after spending months or years and vast amounts of money without any certainty as to the outcome.

The old saying is that you know a mediation was successful if both parties leave equally unhappy; whether they are equally happy or equally unhappy, my job is to find a resolution that makes sense for both parties. It’s hard to imagine how mediation would be different if there were absolutely clear laws in place, but the fact is that the uncertainty is often helpful in allowing me to help the parties resolve their claims.

Stuart Rudner is a leading Canadian employment lawyer and mediator at Rudner Law. He is the author of You’re Fired! Just Cause for Dismissal in Canada. He can be reached at 416-864-8500 or stuart@rudnerlaw.ca.

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