Ending an employment relationship can be fraught with legal risks. Sometimes these risks arise even before the employee has started working for the employer. A recent decision, Kim v. BT Express Freight Systems, confirms that employers may be liable for damages if they revoke an accepted offer or terminate an employment relationship before the employee actually begins working.
The employee was recruited by a new employer with the promise of a much higher salary. He signed a written offer, and gave notice to his former employer. Less than a week before his start date, the new employer told him his job offer was being rescinded without any explanation or compensation. As his previous role had already been filled, he was unemployed for approximately ten weeks before eventually finding new employment.
The employee sued. After the employer did not respond to the claim, the court was asked to decide how much money he should be paid by the new employer. The new employer did not appear for the court hearing.
The judge accepted all of the facts stated by the employee because the new employer did not respond to the claim or appear in court. Based on those facts, the judge found that the new employer breached the employment agreement by unilaterally ending it without notice or cause.
The judge said an employment contract creates an employment relationship even before any work begins. When that relationship is terminated, the employee is entitled to notice or pay in lieu. The judge also found that the probationary clause in the contract -- allowing termination at any time in the first three months without notice or pay in lieu -- did not apply because the employee never had the opportunity to start work and begin the probation period. As in any other case of wrongful dismissal, the judge said the reasonable notice period was to be calculated based on the character of employment, the age and length of service of the employee, and the availability of similar employment and other relevant factors. Based on these factors, as well as the inducement of the employee, the judge awarded damages equal to three months' salary at the level promised in the employment agreement, less his earnings from new employment during that time.
Takeaways for Employers
It is important to keep in mind the facts stated by the employee were deemed to be admitted by the new employer because it did not defend the claim. Those facts formed the basis for the judge's reasons. The judge also did not address whether the employment agreement contained a valid termination clause that could have limited the employee's entitlement to common law reasonable notice. It is likely it did not or this should have affected the analysis and limited the damages awarded.
This decision shows one of the risks of rescinding an accepted job offer without any unfulfilled conditions, particularly after the hired employee has given notice of resignation to their former employer. An employment agreement becomes an effective contract once it is executed by the parties even if the employee has not yet begun work. Termination of the employment agreement could give rise to common law entitlements upon termination if these are not limited by a valid termination clause.
Employers should ensure that their employment agreements are robustly drafted, particularly with enforceable termination provisions that limit liability. Employers cannot rely on probationary clauses to mitigate risks from employees who have not started work. If you need assistance reviewing your employment contracts, please contact the author or your usual Fasken lawyer.
 Kim v. BT Express Freight Systems (2020), 317 A.C.W.S. (3d) 255 (Ont. Sup. Ct.).