Obligations when there's an employment agreement in place but no service yet
Question: If an employer decides to terminate a new worker's employment after the worker has signed an offer or employment agreement but before the worker has actually started work, what sort of notice or compensation would the employee be entitled to?
Answer: Employment standards legislation does not address the revocation of accepted job offers. As such, the obligations owed by an employer to an employee who was “terminated” prior to commencing work are governed by common law.
At common law, there is debate as to whether revocation of an accepted employment offer prior to commencement of services can give rise to a wrongful dismissal action, or if such action must be characterized as a breach of contract. Regardless of the proper characterization, the evaluation of damages in such cases are the same as cases where a working employee was wrongfully dismissed -- that of reasonable notice.
Courts have rejected the argument that since an employee had not yet commenced employment at the time the offer was revoked, she is not entitled to notice. Rather, in cases where the employee was not given the opportunity to commence services, courts have focused on relevant factors aside from the length of service to calculate reasonable notice, including the employee's qualifications, the level of remuneration of the position, the level of responsibility and skills required, inducement, re-employment prospects and availability of similar alternate positions. In many cases, the employee was awarded with relatively significant pay in lieu of notice even though services had not commenced.
In Thunderchild v. Nog-Da-Win-Da-Min Family & Community Services, the Ontario Superior Court found that a prospective employee was entitled to reasonable notice as a result of the employer's withdrawal of an accepted employment offer. The court took into account the senior rank of the position, the high level of skills and responsibility required, and the fact the employee was unlikely to find similar employment in the area, and concluded that she was entitled to four months' pay in lieu of notice.
Inducement can significantly increase the amount of notice an employee is entitled to. In Horvath v. Joytec Ltd., the Saskatchewan Court of Queen's Bench found that by postponing the employee's start date by over six months, the employer had breached the contract to employ the employee. In assessing the amount of damages, the court took into account the fact the employee was induced by the employer to leave her previous job (among other factors) and awarded the employee with damages in the amount of six months' salary in lieu of notice.
Human rights legislation prohibits discrimination in employment practices on the basis of numerous protected grounds, including physical disability, mental disability, age and race. In the event an employee connects the revocation of an employment offer to a protected ground of discrimination and is able to prove such discrimination, the employer must show that the revocation was reasonable and justifiable or a bona fide occupational requirement. Otherwise, the employer may also be liable for monetary compensation for violation of human rights legislation.
For more information see:
• Thunderchild v. Nog-Da-Win-Da-Min Family & Community Services, 2000 CarswellOnt 545 (Ont. S.C.J.).
• Horvath v. Joytec Ltd., 1989 CarswellSask 329 (Sask. Q.B.).
Tim Mitchell practices management-side labour and employment law at Norton Rose Fulbright’s Calgary office. He can be reached at (403) 267-8225 or [email protected]