Severance obligation to relocated employee

Employees who have been asked to move and later dismissed

Question: Does an employer have a larger severance obligation to a relocated employee? Is there a period of time that can elapse after asking an employee to relocate before dismissing her under standard notice requirements?

Answer: There are two possible ways in which an employee who has been forced to relocate can seek additional compensation at the time of dismissal: A longer notice period or direct compensation for expenses.

As many commentators have noted, there is no exhaustive list of factors to be taken into account when assessing the amount of notice owed in a particular situation. This comment applies to situations where there is no enforceable contractual provision setting out exactly what is required, in which case the common law requirement of “reasonable notice” will apply. Employers should ensure every employee signs an employment agreement which specifies the notice obligations, so this uncertainty can be avoided. If the clause is enforceable, an employee will be precluded from seeking a longer period or additional compensation in light of her relocation or other factors.

In the absence of such a contractual provision, inducement and relocation are factors which the courts can consider in assessing the amount of notice required. In the well-known case of Wallace v. United Grain Growers Ltd., inducement was considered to be a factor even 14 years after hiring. Inducement, or the requirement that an employee relocate, can be used to lengthen the common law notice period.

The obligation of an employee to relocate can also result in an award of compensation for moving costs in certain circumstances. There is a fairly fundamental legal principle that will apply: A party to a contract may be liable for damages arising out of the breach of that contract to the extent that they flow reasonably and foreseeably from the breach. In other words, were the damages claimed reasonably foreseeable, and therefore “part of the deal?” A contract can provide for such, or defeat such a claim, depending on its wording. In the absence of a contract with relevant provisions, the courts will attempt to determine what the parties intended.

Claims for reimbursement of moving costs have been upheld in many cases. That said, some courts have taken the approach that an individual would have to move to obtain new employment even if proper notice had been given, and reimbursement of moving costs should therefore not form part of any award for pay in lieu of notice. Much will depend on the circumstances and the explicit, or implied, agreement of the parties.

As is often the case, a properly drafted and executed employment agreement can address this type of issue and eliminate the uncertainty.

For more information see:

Wallace v. United Grain Growers Ltd., 1997 CarswellMan 455 (S.C.C.).

Stuart Rudner is a partner in Miller Thomson LLP’s Labour and Employment Group in Toronto. He can be reached at (416) 595-8672 or [email protected]

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