Employment Lawsuits Will Rise in Recession

In the current economic climate, companies big and small are feeling the stress of financial insecurity and reduced profits. As a result, more and more Canadians are finding themselves unemployed. This will likely lead to an increase in employment-related lawsuits.

To quote a recent article by CFO Publishing, “layoffs mean lawsuits.” In the United States, employment litigation has risen correspondingly to the decline of the country’s economic health.

In a case of being fired without just cause, a former employee can make a claim of wrongful dismissal; thus age-discrimination lawsuits and so forth have been on the rise recently.

But a business may collapse suddenly, still owing its employees wages and/or benefits. Take for example the case of a Saskatoon company that built trailers for the oilpatch. A slowdown in the tar sands led to its laying off all 270 employees, many of whom are owed outstanding wages. A group of the former employees is now considering a class-action suit.

The number of employment-related class-action suits has been on the rise, according to Toronto-based employment lawyer Daniel Lublin. This has led to what he calls “workplace law’s newest, and biggest, phenomenon: lawyers specializing in class action lawsuits.”

As companies like IBM and Air Canada let employees go, they will have to be careful to avoid class-action suits – especially since employees are becoming informed and asserting their rights.

Finally, even without firing employees, a company can become the target of a class-action suit. In the current case of CIBC, the bank is fighting employee claims of unpaid overtime. Since the ramifications of this case “could spill over into workrooms across the nation,” companies that scrimp and save in the face of economic uncertaintly may find themselves in the courtroom if they choose to do so at the expense of employee entitlements.


UPDATE, 26 Feb 2009:  Today as part of a series looking at the recession’s effects on people in Toronto, the Globe & Mail published an article about booming business at one employment law firm. The article references this survey of litigation trends, in which “Labour/employment” is by far the top type of legal dispute currently worrying Canadian firms.