A Bad First Hire Taught This Company to Write It Down

The situation

Rohan, Quang and Huong had built something real. Rohan, a dentist, had opened his first clinic more than a decade earlier. Quang, an investment advisor, bought into the business a few years later as a minority shareholder, bringing capital for expansion. Huong joined soon after as the third shareholder, running day-to-day operations across the growing group. By the time they came to Treadstone Law, the company operated several clinics with combined annual revenue in the range of $20 million to $60 million and close to 150 staff.

They had grown quickly, and their internal systems had not kept pace. Hiring decisions, for most of the company's history, happened the way small partnerships often handle them: a conversation, a verbal understanding on salary and start date, and a handshake. That approach had worked, more or less, while every hire was a hygienist or a front-desk coordinator brought on through word of mouth. Those roles turned over often enough, and the amounts involved were small enough, that an informal approach rarely caused lasting damage. It stopped working the day they hired their first regional operations manager.

None of the three shareholders had a background in human resources, and none had ever sat down together to agree on a hiring process for a role at that level. Each of them assumed someone else was handling the paperwork. No one was.

What went wrong

The new operations manager was meant to be the fix for a real problem: nobody at the ownership level had time to standardize scheduling, supply purchasing and staffing across the clinics. Rohan made the offer himself, over two phone calls. Salary, start date, a vague mention of a bonus tied to "how things go." No offer letter followed. No written employment contract was ever signed.

Five months in, it was clear the hire was not working out. The manager had struggled to gain the clinic managers' trust, made a costly purchasing decision without approval, and missed deadlines on a staffing project the shareholders considered urgent. Huong terminated the employment in a short meeting, effective immediately, with two weeks' pay offered as a goodwill gesture.

Three weeks later, a demand letter arrived from the former manager's lawyer. It asserted that the manager had been dismissed without cause and without adequate notice, and it sought several months' pay in lieu of notice — a lump sum reflecting what is known in Ontario as reasonable notice at common law. This is different from the minimum notice set out in the Employment Standards Act, 2000, which sets a modest floor based on length of service. When an employer dismisses someone without cause and there is no valid written contract limiting notice to that statutory floor, courts generally fall back on the common law standard, which considers the employee's age, position, length of service and the availability of comparable work — and routinely produces notice periods far longer than the statutory minimum, particularly for management roles.

Because there was no signed contract at all, there was no termination clause to limit the manager's entitlement to anything less than what a court might award. The company's exposure was genuinely open-ended.

What we did

1. Assessed the real exposure before responding. We reviewed the manager's role, salary, five months of service and the local job market for comparable positions to estimate what a court might realistically award as reasonable notice. Based on that review, exposure at trial could plausibly have reached eight to ten months' pay, translating to roughly $95,000 to $120,000 on the manager's salary — far more than the two weeks Huong had already offered.
2. Advised against litigating the point on principle. The shareholders were frustrated and wanted to argue the manager's own conduct justified the termination. We explained that a for-cause dismissal is a high bar to meet in Ontario, requiring serious misconduct, not simply underperformance, and that fighting the claim on those grounds carried real risk of losing outright while running up costs on both sides in the process.
3. Opened settlement talks directly with the manager's lawyer. We proposed a lump-sum resolution reflecting a mid-range notice estimate, framed around the manager's short tenure and the company's good-faith severance offer at termination, while acknowledging the absence of a written contract as a real weakness in the company's position.
4. Negotiated the final number down from the opening demand. The manager's initial ask reflected the higher end of what a court might award. After two rounds of exchanges, the parties settled at a lump sum in the mid five figures, well below the top of the exposure range but higher than the shareholders had hoped to pay.
5. Turned the incident into a systems fix. Once the claim was resolved, we worked with the three shareholders to build a written employment agreement template for every future hire, with a properly drafted termination clause limiting notice obligations to the statutory minimum where the company chooses to rely on it. We paired that with an offer letter template, a short employee policy handbook covering probationary periods, expectations and progressive discipline, and a one-page checklist for the shareholders to follow before any manager-level hire goes out.
6. Clarified who has hiring authority. Part of what had gone wrong was structural: three shareholders had each, at different times, made informal commitments to staff without checking with the others. We helped the group agree in writing on which shareholder has final sign-off on management-level offers and terminations, reducing the chance of another handshake hire slipping through without paperwork.

The outcome

The former manager's claim settled for a lump sum of roughly $58,000, paid in exchange for a full release of any further claims. That was a real cost the company would not have faced with a properly drafted contract in place from day one, and it was also a real saving against the $95,000 to $120,000 the company might have owed had the matter gone to court and lost on the notice question. Both sides gave up something: the manager settled for less than the opening demand, and the company paid more than the two weeks it had originally offered. Neither side got to call it a clean win, which is fairly typical of how these disputes end once a demand letter is on the table.

The more lasting result was the policy suite. Every hire made since has started with a written offer letter and a signed employment agreement, and the shareholders now have a single point of accountability for management-level hiring decisions. Six months after the settlement, the company used the new template to hire a second regional manager — this time with a signed contract in place before the first day of work, a probationary period clearly defined, and expectations set out in writing rather than left to a phone call.

Rohan later described the settlement as an expensive but affordable lesson. Given the company's revenue, the cost of the claim was manageable on its own. What mattered more to the three of them was that the same mistake, at a larger scale, would not happen again.

What you can learn from this