In Buchanan v Introjunction Ltd., 2017 BCSC 1002, the BC Supreme court made it clear that, in the absence of an express contractual provision to the contrary, an employer can be liable for damages if it retracts an offer of employment that has already been accepted, even if the employee has not yet started work .
In July 2016, the plaintiff applied for employment with the defendant and, after a series of meetings, accepted a formal contract of employment for the position of Senior Software Engineer. The plaintiff signed and returned the contract to the defendant on October 16.
The contract provided that the plaintiff would start work on November 1, 2016 at an annual salary of $125,000.
The contract also had a three-month probationary clause that allowed the defendant to terminate his employment without cause and without notice.
On October 29, the defendant’s Chief Executive Officer met with the plaintiff and informed him that it needed to retract his employment for business reasons.
Following the retraction, the defendant suggested that it might be able to provide the plaintiff with some short-term employment.
The plaintiff declined this offer and found alternative employment on or around December 19, 2016.
The plaintiff sued the defendant for wrongful dismissal and at trial, there were three issues before the court:
- Whether the retraction amounted to a wrongful dismissal.
- Whether the plaintiff was entitled to reasonable notice.
- Whether the plaintiff had failed to mitigate his losses.
Regarding the first issue, the court confirmed that even where an employee is terminated before he or she starts work, the employee is entitled to reasonable notice or damages in lieu of notice, absent an express contractual provision to the contrary.
The court went on to note that the issue then, was whether the employer could rely on the probationary clause to terminate the plaintiff’s employment without paying any damages in lieu of notice.
The defendant argued that the probationary clause should apply because it would not be logical for the plaintiff to enjoy better rights before starting work than after he started work.
The court disagreed with the defendant and held that the defendant could not rely on the probationary clause for the following reasons:
- the clause provided that the three-month probation would start effective November 1, 2016 so it was not in force on the date of the retraction;
- a probation clause does not give an employer an unfettered right to terminate an employee without notice or cause, per Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42; and
- the retraction of the employment offer amounted to a repudiation of the contract, which was accepted by the plaintiff. Because the defendant stated a clear intention to not be bound by the contract, it could not now rely on a provision of that contract to avoid or limit its damages.
Regarding the second issue, the court determined that a notice period of six week was reasonable based on all of the circumstances.
Regarding the third issue, the court held that although the employer had made a genuine offer of short-term work, it was not an offer a reasonable person, “given all of the prevailing circumstances”, would have accepted.
The court noted that the offer was vague and lacked particulars and that it was not unreasonable for the plaintiff to decline to pursue “an ill-defined job for unknown hours at a reduced salary” from the employer who had recently advised him that there was no need for his services.
- An employer who terminates an employment agreement without cause, must provide notice, or pay in lieu of notice, even in situations where the agreement is terminated before an employee starts work.
- Employers should use carefully crafted termination clauses to limit their liability in the event of without cause terminations.
- The termination clauses should be drafted in a way that protects the employer regardless of when the termination occurs.
- Employers must remember that probationary clauses are not to be viewed as a mechanism to get rid of an employee without giving notice, or pay in lieu.