Cost of terminations and bad PR might not be worth outsourcing savings for bank
The Royal Bank of Canada (RBC) has been in the spotlight since April 6, when the Canadian Broadcasting Corporation (CBC) reported the bank is replacing more than 40 employees with temporary foreign workers through outsourcing.
A multinational outsourcing firm from India, iGATE Corporation, employs the foreign workers and has a contract with RBC to provide the bank with services in information technology (IT).
Following the report, RBC confirmed foreign workers from iGate will work in Toronto offices until 2015. At that time, most of the work will be transferred abroad, although some foreigners will remain in Toronto.
Public reaction
The news drew criticism from the public, as many became concerned about foreigners taking over the work of Canadians. Further, CBC reported the displacement may go against federal rules for the Temporary Foreign Worker Program: it is against federal rules for any company to bring foreign workers into Canada temporarily if it will put Canadian citizens out of work. Meanwhile, iGATE reported all work authorizations were properly issued under Canadian law and policy, as foreign workers enter Canada with intra-company transfer visas.
However, the decision sparked controversy and caused a public relations crisis for RBC. In response to public reactions, the bank issued an apologetic letter on April 11 that was published in national newspapers the following day. President and Chief Execute Officer Gordon Nixon stated that “RBC has been in the news this week in a way no company ever wants to be.”
Nixon said RBC will make the following commitments: offer comparable job opportunities to employees affected by the outsourcing, review supplier arrangements and policies with a focus on Canadian jobs and prosperity, keep client call centres in Canada, and prepare a new initiative aimed at helping young people gain work experience.
Impact on employers
RBC will be exposed to substantial payments of notice as a result of terminating numerous employees, not to mention employment claims for other damages. Whether this cost has been considered in the decision making process is unknown. Employers are well advised to count the cost beforehand as the actual savings of hiring foreign workers may be negligible.
Impact on employees
Many of the RBC employees affected by the outsourcing are in their late 50s or early 60s and not ready to retire, but will likely find it difficult to find a new job. Employees should be aware that the older they are and the tougher the job market, the higher their notice entitlement upon termination. Given these circumstances of the termination being outsourcing to foreign workers, the more sympathetic the courts will likely be.
Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique in Markham, Ontario. He can be reached at www.MinkenEmploymentLawyers.ca. Ron gratefully acknowledges Sara Kauder and Kyle Burgis for their assistance in preparation of this article.
