Getting fired is generally not an enjoyable experience. However, it can be particularly frustrating when you are terminated from a position that you were initially recruited for. This is especially true for people who left long-term employment elsewhere based on promises about the nature and term of a new position, only to have their employment cut short.
Canadian courts agree that such situations are distinct from other instances of termination. This distinction is most clearly reflected in two lines of jurisprudence. First, employees who were induced to leave previous employment may be entitled to a longer common law notice period upon termination. Second, such employees may be able to seek damages for negligent misrepresentation in the event that their notice entitlements are limited by an employment contract.
Extended Notice
In Wallace v. United Grain Growers Ltd., the Supreme Court of Canada held that courts would consider whether a terminated employee had been induced to leave previous secure employment when determining the proper notice period.
A general rule of thumb is that reasonable notice of termination at common law usually equals approximately one month per year of service. Therefore, without the decision in Wallace, an employee who was induced to leave employment with a company that he or she had worked for for 10 years, and proceeded to be terminated from his or her new employment after only one year, would only be entitled to approximately one month of notice.
Instead, the decision in Wallace has made it so that the 10 years of service with the previous employer is taken into account, and the jurisprudence has developed such that the additional notice entitlement in such situations will often reflect the amount of time that the employee provided services to the employer that he or she was induced to leave. Therefore, a court would be more likely to find that the employee in the above example is entitled to closer to 11 months’ notice.
Negligent Misrepresentation
Although more difficult to establish, an employee who was induced to leave secure employment may also be able to claim that their new employer was negligent in making representations about the nature of their new employment, and that, upon termination, the employee should be put in the same financial position he or she would have been in had the misrepresentations not been made. That is, the same financial position that they would be in if they were still working for their previous employer.
In many situations, there would be little point in attempting to claim negligent misrepresentation, as the amount claimed would be similar to that of a claim for wrongful dismissal where inducement was a factor, and a claim for negligent misrepresentation is more difficult to make out. However, where an employee’s entitlements upon termination are limited by a termination clause, it may be possible to successfully argue that he or she accepted the new position on the basis of negligent misrepresentations on the part of the employer and that, but for the misrepresentations, he or she would still be employed at their previous secure employment. Therefore, he or she is entitled to compensation under the tort of negligent misrepresentation, rather than due to breach of contract, meaning the termination clause has no effect on such entitlement.
In Queens v. Cognos Inc. (1993) 1 S.C.R. 87, the Supreme Court of Canada outlined the five requirements for a finding of negligent misrepresentation:
- There must be a duty of care based on a “special relationship” between the representor and the representee.
- The representation in question must be untrue, inaccurate, or misleading.
- The representor must have acted negligently in making said misrepresentation.
- The representee must have relied, in a reasonable manner, on said negligent misrepresentation.
- The reliance must have been detrimental to the representee in the sense that damages resulted.
Therefore, if an employer represents that the new position would be secure and long-lasting during recruitment, and proceeds to terminate the employee relatively soon after his or her employment commences, it could constitute negligent misrepresentation on the part of the employer.
Note that negligent misrepresentations in the hiring process are more difficult to prove than mere inducement. Further, the existence of things such as probation clauses, which appear in many employment contracts, rebut a claim that the employer represented that the employment was to be secure.
Takeaways
Employees who are being recruited by a potential new employer do not have to worry as much about losing the entitlements they have earned through their existing long-term employment when deciding whether to make a move. However, employment agreements should always be reviewed by a lawyer as a termination clause in an agreement with a new employer could wipe away any entitlements earned through your previous employment that you hoped to be able to preserve. Although it may be possible to claim negligent misrepresentation in such circumstances, it will be significantly more difficult to make out than a claim for a longer notice period based on inducement.