A Promise is a Promise: When Employees are Induced and then Wrongfully Dismissed

Written on behalf of Peter McSherry
Employment Contract
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With reports of an increasingly tight labour market, many employees in Canada are hearing from recruiters and prospective employers on LinkedIn or through other channels about opportunities. This outreach can be exciting and even flattering. However, it leads to some difficult decisions. When does it make sense to leave secure employment to start over somewhere else? What will it be like starting somewhere new during the pandemic? This can be especially important if the role is a remote office role. Plus, how will changing jobs impact rights to job security, severance, and other employment-related benefits?

As these questions show, the decision to change roles is, of course, not a legal decision alone. There are many factors employees consider that are personal and financial. However, there are also legal considerations that employees should review before changing roles.

What to Look for in the Employment Contract When You are Being Recruited

Many legal rights and obligations related to the employment relationship come from the employment contract. While the Employment Standards Act, 2000 provides basic minimum rights for many Ontario employees, employers often provide employees with even greater rights through a contract (for example, a wage that is higher than minimum wage, more vacation days than the minimum standard, etc).

It may not always be clear what is in the employment contract. You may even feel like you don’t have one. Employment contracts often do not have “Employment Contract” written at the top of them and are often made up of more than one document.

For example, sometimes a role may be offered verbally or by email, in which case what was said or written in that exchange may form part of the employment contract. A formal offer letter or contract document may also be part of the contract. Other documents can be incorporated by reference such as employment policies. For example, an offer letter may say the employee is entitled to four weeks of vacation to be scheduled in accordance with the company’s vacation policy.

A Change in Employment and the Impact on Employment Benefits

Whatever the form the employment contract takes, changing jobs may impact your rights. A careful review of your current employment benefits and how they compare to any potential offer is important. This goes beyond pay and hours of work and extends to non-monetary benefits such as: What are your vacation rights? How is your schedule determined?

Another factor to consider is how any loss in seniority may impact you. For example, will your new employer recognize your service with your former employer? If so, will that apply to vacation policies or other benefits? Will it apply to any service requirements under the severance policy?

What Happens to Employees Who are Induced and then Wrongfully Dismissed?

If you decide to make the jump to a new employer, things may not always work out as planned. For most non-union Ontario employees, there is a common law right to reasonable notice or pay in lieu of reasonable notice. What is reasonable depends on several factors, which we previously covered here and include:

  • Age;
  • Length of service;
  • Nature of the position held; and
  • The availability of similar employment.

Length of service can be challenging to determine when you have been induced from previous secure employment. Does your length of service only reflect your tenure in your current role or does it incorporate your previous service? Sometimes employment contracts specifically recognize previous service, however, many contracts are silent on the issue.

Contracts that don’t Include Previous Service

When the contract is silent on previous service, the courts will consider the circumstances of the case in determining what the reasonable notice period should be. Some factors that may be considered include:

  • Who made the initial contact?
  • How persistent were recruitment efforts?
  • Was the employee offered significantly higher wages than they received in their previous role?
  • Was the employee provided with a signing bonus?
  • Were any promises of job security made by the employer?
  • Was the employee offered other non-monetary benefits – more prestigious title, managerial responsibilities?

Inducement will have a stronger impact on the wrongful dismissal damages where the employee’s service in their current role is short and was very lengthy in their previous role. For example, in New Brunswick Legal Aid Services Commission v Paulin, the employee’s service was just 4 years, however, their previous service was 20 years. The court determined the service wasn’t continuous, but the inducement and previous service needed to be taken into account and ultimately awarded 12 months of pay in lieu of notice. In that case, the judge explained the reasoning:

The Commission induced Mr. Paulin to leave his position with the civil service to join their ranks and acknowledged that various accrued entitlements such as vacation and benefits would be recognized.

While the Commission essentially argues that Mr. Paulin “should have known” that his previous service would not be recognized [for severance purposes], they do not dispute that Mr. Paulin was never expressly informed of this fact.

Given Mr. Paulin’s extensive work experience with the civil service, all of which was well known to the Commission, if they intended to start Mr. Paulin off at zero in terms of his years of service while at the same time maintaining all of his benefits and vacation entitlements, they should have told him.

As noted in the above case, where there is inducement, the courts will consider previous service in determining the reasonable notice period. If employers do not want previous service to be taken into account when it comes to their severance obligations, they should include express language in the offer of employment.

How to Address Bad Faith in Wrongful Dismissals Following Inducement

Another factor employees should consider is whether there were any bad faith actions on behalf of the employer in the manner of the dismissal. The Supreme Court of Canada has confirmed that there is a duty on all parties to “act honestly in the performance of contractual obligations”.

As part of any wrongful dismissal claim where there is a termination of employment shortly after inducement, it is important to explore whether the employer engaged in bad faith conduct, as additional damages may be required. As part of the honest performance of contractual obligations “parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract”. Misleading an employee about the nature of the role, compensation, duties or the job security attached to the role could attract liability for bad faith damages as part of a wrongful dismissal claim that arises shortly after inducement.

Contact Peter McSherry Employment Lawyer for Advice on Reasonable Notice and Severance Packages

The amount of reasonable notice owed on termination can be affected by many common law factors, including inducement. Employment Lawyer Peter A. McSherry assists employees seeking advice on their entitlement to an extended reasonable notice period and can review proposed severance packages. For employers, we can ensure employee dismissals and lay-offs meet all legal requirements, reducing the risk of employment litigation. Contact us online or by phone at 519-821-5465 to schedule a consultation.