The retraction of an accepted offer of employment can create significant legal challenges for an employer. The BC Supreme Court recently reaffirmed that, absent an express contractual provision to the contrary or just cause, a pre-employment retraction of an accepted offer of employment constitutes termination of employment entitling the individual to reasonable notice or damages in lieu of notice.
In Buchanan v. Introjunction Ltd., 2017 BCSC 1002, the employer decided that it needed to retract an accepted offer of employment for business reasons. A key issue was whether the employer could rely on a probation clause within the contract which would have enabled it to terminate the plaintiff’s employment, had he already started work, without any obligation to pay damages in lieu of notice within the first three months of employment. Despite the employer’s argument that it would be illogical for the plaintiff to have stronger rights before starting work than after, the Court found that the employer could not rely on the probation clause for three reasons.
First, the probation clause provided that the three month probation period commenced on the plaintiff’s scheduled start date of November 1, 2016. Therefore, the probation provisions were not applicable at the time of the pre-employment retraction.
Second, a probation clause does not give an employer an unfettered right to terminate an employee without notice or cause. The court referred to a recent decision in Ly v. British Columbia (Interior Health Authority), 2017 BCSC 42, which was discussed in more detail in our blog, available here. In short, there is seemingly growing support in B.C. caselaw for the proposition that employers must engage in a good faith assessment of the employee’s suitability for permanent employment before exercising a “probationary” termination clause.
Third, although it was not argued by the parties, the Court also commented that the employer’s retraction of the employment offer amounted to an anticipatory repudiation of the contract, which was accepted by the plaintiff. The employer’s retraction communicated its clear intention not to be bound by the contract. In the Court’s view, the repudiating party could not rely on a provision of the contract, here the probation clause, to avoid or limit its damages. We note that this appears to be contrary to a seminal principle of contract law, namely that the party subject to the breach of contract is to be placed in the position he/she would have been in had the contract been performed. Therefore, there are some strong arguments to be made that employers should be able to rely on a termination clause or other important clauses in an employment contract despite a breach by the employer.
Finding that the plaintiff was wrongfully terminated and the probation clause was not applicable, the Court determined that a reasonable notice period of six weeks would be reasonable for a 27 year old senior software engineer in the circumstances. The Court also considered the plaintiff’s duty to mitigate and found that although the employer had genuinely offered other re-employment of short-term work to the plaintiff it was not an offer a reasonable person, given all the prevailing circumstances, would accept. The offer was vague and lacked particulars about start date, number of available hours and scope of work, as well as pay (which was framed as “reasonable hourly wage”).
Employers should utilize termination clauses to limit liability. Buchanan demonstrates that to rely on a termination provision to revoke an offer, such clauses have to be drafted to have legal effect even before the employment commences. Employers continue to have the lawful right to enter into agreements that provide the minimum termination entitlement required by employment standards legislation. For example, this may include no notice for employment periods of less than three months for provincially regulated employees in B.C. Further, employers should carefully consider whether it is advisable to refer to the word “probation”, at all, as it may import more legal obligations (or at least uncertainty) than intended.