Mediation 101 for the Client

Mediation in Employment Matters

Mediation has become an effective and popular tool to achieve a settlement of existing and even threatened litigation, particularly in employment law cases going to trial. Often the parties may voluntarily agree to use a mediator to try to settle the case. It is a process which should be considered in every case.

The Mediator

The parties will agree to the person who is to act as the mediator. Generally this person is an experienced employment lawyer who has been around the block a few times.

The Mediation

The mediator has no power to force either party to a settlement. Nonetheless, the mediation process has proven to be very successful in resolving employment law disputes, usually at a relatively early stage of the case when legal costs are still modest. It is important that all relevant documents are exchanged between the parties before the mediation date. This will include documents detailing the plaintiff’s job search in the case of a wrongful dismissal, the termination letter, supporting performance materials, if in issue and generally all documents relevant to the issues in the case.

If the case is resolved, minutes of settlement will be signed at the mediation. Where settlement funds are required by the agreement, payment is usually made within two to three weeks. A general release will always be required. This means a release of all claims and not just of the allegations made in the immediate case.

Often the employee plaintiff will request a reference letter be provided as a settlement term. If so agreed, this will become a covenant of the agreement. This is a good example of a settlement term which can be attained through mediation, yet a court has no power to order. A reference letter provided in this manner will be treated distinctively from the usual reference an employer may provide as this is normally given a special treatment under libel law which allows the employer a fair comment defence or “the right to be wrong”. This will not apply to such a reference given as a contracted settlement term.

Division of Settlement Funds

The parties can also agree to setting out sums for human rights damages and other claims, such as tort sums, which may have a non-taxable result. This again cannot be done in court. Such an agreed allocation will not only impact tax liability but also the obligation to repay EI funds received to date from the settlement proceeds. Counsel may be creative to minimize these obligations, provided that there is a rational basis for the allocations. See the tax summary stated elsewhere.

More about EI

Speaking of Ei issues, a more comprehensive review is as follows: The Employment Insurance Act provides that if a person received EI, and later received a termination settlement, there is an obligation to repay EI.

For example if the person received EI for 6months and subsequently received a settlement that compensated for 6months income all the EI would have to be repaid.

There is a statutory duty upon the employer to deduct the EI sum payable, which can sometimes result in a delay of payment of all settlement funds, pending a clearance letter being received from HRSDC.

In summary, EI will not treat as earnings, where that part of the settlement that is fairly shown to be any of the following:

1. Legal Fees;

2. Mental distress or pain and suffering if accompanied by evidence of medical care;

3. Reimbursement of job search, relocation or retraining expenses;

4. Damages for loss of dignity, self-worth and reputation;

5. A sum paid in exchange for a waiver of an existing right to reinstatement of employment.

Hence any sums paid for damages reflected in the above items 1-5 will not create an EI repayment obligation. Note the need for medical evidence in point 2 above. There is no absolute need for medicals in proving the claim at trial, but nonetheless it is wise to pay heed to the bureaucrats to avoid any later hassles.

Confidentiality & Privilege

The mediation is usually based on a mediation agreement by which the parties agree that the contents of the mediation discussion cannot be repeated to others outside of the mediation. This again is a benefit of mediation. The terms of settlement will always be confidential. A court ruling will always be public.

Advice on Mediation

It is important to understand the mediation process and its significance. When conducted fairly, it can often lead to an early settlement of the case and can save time and money for all parties.            

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