HERE�S A TIP FOR EMPLOYERS: LOOK BEFORE YOU LEAP!

In the employment law world, wrongful dismissals eventually come down to a question of money. Looking at how much money a wrongful dismissal might cost in damages, before you leap into firing, is a good strategy for any employer.

Understanding the employment context in which the firing took place is a good first step towards estimating the possible damages.

Chapple was a restaurant manager employed by Umberto Management Ltd. which operates the Trattoria and Il Caminetto restaurants at Whistler. She had been employed, initially as a food server and later as a manager, between 1994 and 2007.

When Chapple�s position was terminated, she sued for wrongful dismissal and was awarded 15 months� pay in lieu of notice. It was the calculation of the resulting damages which was notable.

As a restaurant manager, Chapple earned a base wage and also had two sources of tips. Her gratuities came primarily out of a so-called �house gratuity� and she also received some tips directly from customers.

The house gratuity was funded by the employer, was based on gross revenues taken in during a shift, and was split between the restaurant�s managers and hostesses. The calculation of the house gratuity fluctuated between 2% and 2.5% of gross revenues.

Chapple�s evidence was that she could expect to receive more than $55,000 in tips annually. She hadn�t, however, been in the habit of reporting all of this income for tax purposes.

Both the Supreme Court of B.C. and, subsequently, the B.C. Court of Appeal upheld Chapple�s evidence regarding her earnings from tips.

Normally, when we talk about pay-in-lieu of notice, we tend to focus on salary or wages. But, the concept of damages for wrongful dismissal is intended to capture all entitlements lost by the individual as a result of having been deprived of a reasonable working notice period.

In the restaurant context, that calculation of damages must take into account that a substantial portion of the dismissed employee�s income may have arisen from gratuities. In Chapple�s case, her annual base salary was just over $50,000 and so her additional income from tips exceeded her base salary.

The bad news for her former employer, Umberto, was that she was owed 15 months� worth of those gratuities. In Chapple�s case, that added up to an additional $71,375 in damages.

That meant that, prior to any mitigation earnings being deducted, the gross amount payable to Chapple in lieu of notice exceeded $134,000. That�s a big chunk of money for any business.

As I say, wrongful dismissals eventually come down to a question of money. Sometimes, if the employer looks before it leaps, and sees how much money is at risk, less expensive alternatives may become more attractive.

Robert Smithson is a lawyer in Kelowna practicing exclusively in the area of labour and employment law. For more information about his practice, or to view past �Legal Ease� columns, log onto www.pushormitchell.com. This subject matter is provided for general informational purposes only and is not intended to be relied upon as legal advice.