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A new factor in dismissal

A duty of honesty in contractual relationships can be applied to employment relationships

By Stuart Rudner 

We are all familiar with the usual factors to consider when assessing an individual's common law entitlement to reasonable notice: 

  • length of employment
  • age
  • position/character of employment
  • availability of similar employment. 

We also recognize that the courts have deliberately not limited the factors to be considered, and will take any other relevant factor into account. The most common additional factor is inducement; if the evidence shows the individual was lured away from secure employment, that will increase the amount of notice provided.

Interesting, an Ontario court recently took into account an employer's breach of the duty of honesty in contractual relationships in order to extend the notice period. 

By way of background, the Supreme Court of Canada confirmed, last year, that parties to a contractual relationship have a duty to act honestly in the negotiation and performance of that contract. It has not taken long for that decision to have implications in the employment law context. 

In Antunes v. Limen Structures Ltd., the Ontario Superior Court of Justice found that John Antunes was induced to leave his previous position as an independent contractor in order to join the defendant. The court found the defendant had misled the plaintiff with respect to the nature of his position, the fact that he would be awarded shares in the company, and the financial condition of the company. 

Specifically, although the plaintiff was hired to act as a senior project manager, he was given lower-level work. Furthermore, although the defendant had represented it was “thriving" and worth $10 million, the evidence was that the company was actually not in a strong financial position.

Furthermore, although there were representations the company had a residential division, this was untrue. This was relevant in the sense that the plaintiff had been promised he would be given five per cent of the company's shares and potentially up to five per cent of the shares of the company’s residential division within a year of his commencement of employment. 

Not surprisingly, the court found the defendant did not deal with the plaintiff honestly in the course of negotiating his employment contract. From an evidentiary standpoint, it is important to note the defendant did not call any witnesses or produce any documents to refute the allegations that were made. The court, as it should have, made an adverse inference as a result and, effectively, accepted the evidence of the plaintiff. 

The plaintiff worked for the defendant for less than a year. He never received the five per cent of shares in the company as promised, and never performed in the role that was represented to him. He was 50 years old at the time of termination. 

Although the plaintiff argued the factor of inducement should be considered, the court found his previous work as an independent contractor was not secure or long-term. However, the court took the dishonest behaviour of the defendant into account and awarded a notice period of eight months. 

It is not surprising a court would hold dishonest conduct against a defendant and use it in order to increase the notice period. However, the Antunes decision demonstrates how the Supreme Court of Canada's recent adoption of a duty of honesty in contractual relationships can be applied to employment relationships. It also demonstrates the risk that a defendant takes when it fails to adduce any evidence to refute allegations of dishonesty.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Stuart Rudner

Stuart Rudner, Employment Lawyer and MediatorStuart Rudner is the founder of Rudner Law (RudnerLaw.ca), a firm specializing in Employment Law and Mediation. He can be reached at stuart@rudnerlaw.ca, (416) 864-8500 or (905) 209-6999, and you can follow on Twitter @RudnerLaw.
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