There are few studies dealing with the post-employment job prospects of terminated employees. Counsel for the terminated employee will always say that their client’s job prospects are dire and that an extended period of unemployment is probable if not certain. Counsel to the employer will argue that the period of unemployment will be short and that, given the availability of other employment opportunities and the skill set of the employee, alternate employment should be secured quickly.

The truth is, particularly during the severance negotiation phase, that it’s a bit of a guess.  The answer (or guess) factors into many things including the severance (assuming no legally enforceable contract of employment and an indefinite term hire), the structure of the offer and mitigation.

I came across a really interesting recent study by René Morissette and Theresa Hanqing Qiu Turbulence or Steady Course? Permanent Layoffs in Canada, 1978-2016 (IRPP Study 76. Montreal: Institute for Research on Public Policy) that puts some data behind the arguments.  It’s worth reading in detail, and I’ll leave that to you, but here are a few highlights.

The authors touch on COVID-19 and the current circumstance:

At this time, it is still too soon to predict what the full labour market ramifications of the pandemic might be. There remains much uncertainty regarding the severity and duration of the resulting economic downturn, and hence the extent to which the layoffs could become permanent.

Clearly, the pandemic has put unprecedented pressures on employers and employees and the job market has been thrown into turmoil. That said, the authors consider the data with a view to gaining “perspective on these issues, we need to assess how the magnitude of job displacement and post-displacement labour market outcomes have evolved over the past few decades in Canada.”

According to the study, longer tenured terminated employees (those with more than six years of service with the same employer) experience lower re-employment rates in the year following job loss. Where they do find employment, the study notes that they are more likely to suffer a decline in earnings:

In line with the previous discussion on post-displacement changes in earnings, we find that displaced long-tenured workers are much more likely than those with shorter tenures to experience earnings declines of at least 10 percent in the year after job loss.

The study also finds that men and women with a disability are less likely to be re-employed than those with no disability, “but the estimated differences are not always statistically significant.”

In terms of education, the study finds that “there is no evidence that laid-off workers who hold degrees, whether men or women, have higher re-employment rates than laid-off workers with high school diplomas or less.” That said, the authors point out that “this does not imply that education has no impact on post-displacement outcomes. Further research is needed to understand the relationship between them.”

It is important to consider, for example, the type of layoff (displacement). According to the authors:

…. while mass layoffs attract considerable media attention, they do not account for the majority of displaced workers. On average, between 53 and 87 percent of the layoffs that took place in the commercial sector occurred in non-mass layoffs.

As such, assistance policies that focus on those displaced through mass layoffs would miss a large percentage of those who lose their jobs.

The study also considers re-employment rates of those who have lost their jobs. The authors look at data with respect to those who “found new, paid jobs in the year following job loss”. They identified some gender differences:

As women participated in the labour force in greater numbers, the percentage of laid-off women who had paid employment in the year following job loss grew over time, reaching 78 percent in 2016, up from 67 percent in 1978 (figure 3). In contrast, the percentage of displaced men who were re-employed in the year following job loss displayed cyclical fluctuations but no clear trend.

Employees laid off in oil producing provinces as a result of the decline of the oil sector in 2015-2016 “had lower re-employment rates than those who lost their jobs between 2010 and 2014”. The authors also note that employees working in manufacturing who were terminated did not fare as well in terms of securing paid employment in the year after layoff than did similarly situated employees in the 1970s. They suggest that this may be due to “the long-term decline in the relative importance of manufacturing in the Canadian labour market.”

We often hear that “older workers” fare worse than “younger workers” in terms of job prospects. The study notes:

In all years, the long-term re-employment rates of displaced men and women aged 55 to 64 are much lower than those of their younger counterparts. This finding is unsurprising, because five years after losing their jobs, many displaced older workers (having reached the ages of 60 to 69) may have decided to retire. Nevertheless, the gap in long-term re-employment rates between older and younger displaced workers narrowed sharply after the mid-1990s.

The past is a good predictor of the future except when it’s not. The authors note that “of course, previous trends are not necessarily indicative of future developments.”

Each case must be assessed on an individual basis – some terminated employees find work quickly while others do not, some suffer earnings declines, others don’t. There are many variables and intangibles at play in any case.

Generalities are to be avoided, although courts do tend to make many assumptions both in the determination of the notional period of reasonable notice in any cases (applying the Bardal factors) and in considering mitigation efforts. This study helps in mining the available data and developing some guidance for consideration and argument.

Making important employment law decisions based on assumptions is certainly to be avoided, but these assumptions, absent evidence to the contrary, continue to be regularly made. Studies of this nature might serve to moderate those assumptions in certain cases, while recognizing that individual situations and circumstances are important considerations.

This is a really interesting study and is worth a read.

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