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Otherwise known as
Michael’s soapbox

2017-12-07T08:58:36+00:00 December 7, 2017|Employment Contracts, Employment Law|

Anticipatory Termination of Employment Proves Costly

In my 25 years of practice I can count on one hand the number of times that I’ve been called for advice in circumstances where an employer extends an offer of employment to a prospective employee and then, prior to the start date, the employer decides to retract or withdraw the offer.

Seeing as how the individual hasn’t commenced employment, what are the consequences associated with doing this?

The Supreme Court of British Columbia considered this in Buchanan v Introjunction Ltd., 2017 BCSC 1002 (CanLII).  Buchanan brought an action for wrongful dismissal against Introjunction.  The Company had extended a written offer of employment to Buchanan in mid-October 2016.  He accepted the offer on October 16, 2016 and his employment was effective on November 1, 2016.   A meeting took place between the Company’s CEO and Buchanan on October 29, 2016 and the offer of employment was “retracted” which retraction was confirmed in a letter on that same day.   The retraction of the offer was due to the Company’s “further evaluation of our business priorities and resource needs”.

Buchanan was able to find other employment on December 19, 2016.

The contract contained a probationary clause (“Employee’s employment shall be subject to a probation period of three months beginning on the Effective Date during which time the Employer may terminate the employment without notice or cause.”).  In addition, the Company indicated to Buchanan that it might be able to help him out, financially, with some short-term employment on smaller projects.  Buchanan did not respond to the offer.

The case is unusual in that Buchanan never worked a day for the Company before his accepted offer of employment was “retracted”.

Was the “retraction of the offer” a wrongful dismissal?

The Court unequivocally held that it was:

It is well established that, absent an express contractual provision to the contrary, an employee who is terminated without cause is entitled to reasonable notice or damages in lieu of notice. That proposition holds true even where the termination occurs before the employee has started work: DeGagne v. City of Williams Lake, 2015 BCSC 816 (CanLII) [DeGagne]; and Horvath v. Joytec Ltd. (1989), 1989 CanLII 4671 (SK QB), 77 Sask. R. 272 ((Q.B.).

The harder question was whether the probationary clause (quoted above) applied and relieved the Company of providing Buchanan with notice or pay in lieu.  Not surprisingly, the Court held that this did not assist the employer.   The Court supported its conclusion for the following reasons:

…. on its face, the probation clause provides that the three month probation period commences as of the effective date of November 1, 2016. Thus, it was not in force on October 29, 2016 when the defendant retracted the Contract. Had the defendant intended to maintain a right to terminate the Contract without notice at any time after execution, it could have included a term to that effect.  on its face, the probation clause provides that the three month probation period commences as of the effective date of November 1, 2016. Thus, it was not in force on October 29, 2016 when the defendant retracted the Contract. Had the defendant intended to maintain a right to terminate the Contract without notice at any time after execution, it could have included a term to that effect.

I reject the defendant’s argument that had the probation clause applied, it gave the defendant an unfettered right to terminate the plaintiff without notice or cause. The purpose of a probationary period is to permit the employer to engage in a good faith assessment of the employee’s suitability for the position in issue.

Of course, where the employee hasn’t started work, it is impossible to conduct a good faith assessment of his or her suitability.

With respect to anticipatory breach, the Court relied on the words of Justice Cromwell in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (CanLII)  (a leading case on constructive dismissal):

… An anticipatory breach “occurs when one party manifests, through words or conduct, an intention not to perform or not to be bound by provisions of the agreement that require performance in the future”: McCamus, at p. 689; see also A. Swan, with the assistance of J. Adamski, Canadian Contract Law (2nd ed. 2009), at §7.89. When the anticipated future non-observance relates to important terms of the contract or shows an intention not to be bound in the future, the anticipatory breach gives rise to anticipatory repudiation. The focus in such cases is on what the party’s words and/or conduct say about future performance of the contract. For example, there will be an anticipatory repudiation if the words and conduct evince an intention to breach a term of the contract which, if actually breached, would constitute repudiation of the contract.

In the end the Court held that Buchanan had been wrongfully dismissed and was entitled to be provided with common law reasonable notice or pay in lieu of such notice.  Following a review of the relevant factors, the Court held that the notional period of reasonable notice was six weeks.

Of note is that the plaintiff appears to have “left secure employment to join the defendant, although he was not recruited”.

On the issue of mitigation, in all the circumstances, the Court concluded that Buchanan wasn’t required to mitigate his damages by accepting the Company’s offer of short term employment on smaller projects.  As the Court put it the “offers of assistance were not ones that a reasonable person would have accepted given all of the prevailing circumstances.”

Conclusion

The case provides an excellent overview of the law with respect to anticipatory termination of employment before the start date.

Also, the Court provides some guidance about how to draft a clause that might allow the employer to terminate even prior to the start date (I confess, I don’t recall seeing that, nor can I imagine an astute employee agreeing to it, but it is an interesting comment so far as it goes).  The point is that drafting might assist an employer in these cases and there might be other language that could safeguard the result.

In addition, query whether additional damages and considerations would apply in the event that the employee, on the strength of a job offer, which he accepts, quits his former employment and then the job offer is “retracted”.  This appears not to have been argued in this case, though the employee did leave a secure position to accept the offer (although he was not recruited).  It is an argument that may have some legs in an appropriate case.