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Publication

TITRE

Don't Make an Offer They Can't Refuse!

DATE

17 février 2005

EXPERTISE

Droit de l'emploi et du travail

Canadian employers exposed to longer reasonable notice period

Employers often make offers or inducements to lure the best and brightest prospective employees away from other organizations. For decades, the act of making employees generous offers in an attempt to draw them away from otherwise stable employment was a consequence-free practice. The worst that could happen was that the star prospect would decline the offer.

But after a number of Canadian court decisions, most recently in Antidormi v. Blue Pumpkin Software Inc. ([2004] O.J. No. 3888), there is clearly more at stake for employers than the time spent wooing prospective employees. Canadian courts have held that they may take into consideration inducements made by Canadian employers to prospective employees when calculating reasonable notice periods owed upon subsequent termination.

Absent an explicit agreement, when an employment relationship is terminated without just cause, Canadian courts will set a monetary amount for the employer to pay to the employee in lieu of the reasonable notice period that the court feels was owed in the circumstances. The general purpose of this "implied" notice is to provide the employee with a reasonable period of time in which to find alternate work. Courts have used a longstanding practice in determining reasonable notice periods that takes into consideration:

the nature of the employment;
the length of service of the employee;
the age of the employee; and
the availability of similar employment, having regard for the employee's experience, training and qualifications.[1]

Increasingly, courts have showed a willingness to look beyond the traditional criteria. Notice periods have been extended in circumstances where the employee had left stable employment, relying on the promise of a better career opportunity. When the new employment relationship goes unexpectedly awry, the new employer may be on the hook for an increased reasonable notice period. Courts are beginning to punish employers who make lucrative offers to persuade employees to leave stable jobs, only to dismiss them shortly after they have joined the new company. In these cases, the reasonable notice period can sometimes be more than the length of the new employment relationship.

The recent Antidormi decision highlights the willingness of courts to extend reasonable notice periods in certain instances. In 2002, Melissa Antidormi was a successful 41-year old, working as a Sales Manager in the information technology sector. Antidormi's 2002 base salary was $90,000, and she was on target to earn approximately $300,000 in sales commissions. When Antidormi was initially contacted and offered a position by Blue Pumpkin in 2001, she had no interest in leaving her current job. But for nineteen months, Blue Pumpkin was persistent in selling their vision of a "New Canadian Team" to Antidormi. Blue Pumpkin flew Antidormi to California, where even the CEO indicated that Antidormi's new position would provide a long-term opportunity.

Blue Pumpkin's persistence paid off. Antidormi took up her new position in July 2002 but was discharged in January 2003.

After hearing her claim for wrongful dismissal, the Ontario Superior Court concluded that Antidormi was entitled to a ten-month notice period despite the fact that she had only worked at Blue Pumpkin for approximately seven months. The Court accepted Antidormi's claim that she would not have left her previous lucrative job if Blue Pumpkin had not misrepresented the job stability and future opportunity at Blue Pumpkin.

In setting a ten-month notice period for Antidormi, the Court cited two earlier wrongful dismissal cases, both decided in Ontario. In one of these cases,[2] based on its finding that the defendant had induced the plaintiff to leave her previous employment, the Ontario Court of Appeal upheld a nine-month notice period to a plaintiff who had only worked for the defendant for one year. In the other case, the Ontario Superior Court of Justice opted to award damages equivalent to seven and a half months' salary after only three weeks of employment because the plaintiff had been induced to leave secure employment.

In Antidormi, the Court then extended Antidormi's ten-month notice period even further to twelve months to compensate for the employer's bad faith conduct. In awarding an additional two months, the Court took into consideration Blue Pumpkin's tardiness in paying Antidormi her commissions owed, as well as Blue Pumpkin's conduct at the time of termination. In setting the damages award against Blue Pumpkin, the Court stated that "Blue Pumpkin, having induced Antidormi to leave secure employment and compensation of more than $300,000.00 per annum, having misrepresented the opportunity, could not arbitrarily deprive her of that opportunity during the period of reasonable notice." As such, Antidormi was entitled to damages calculated as if she had continued in the position she was promised when she was hired, amounting to $320,000, plus benefits, plus the reimbursement of her expenses during the notice period.

The Antidormi decision shows the need for employers doing business in Canada to exercise caution in promising long-term job stability to prospective employees. Ontario courts have shown a willingness to make employers accountable for such conduct by way of extending notice periods. As seen in Antidormi, such promises can be very costly if they go unfulfilled.

[1]. Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.)

[2]. Marshall v. Watson Wyatt & Co., [2002] 57 O.R. (3d) 813

The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.

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