Rights of the Rescinded
If the last few years have taught us anything, it is that situations can change quickly.
For businesses, this has meant adapting and shifting focus and strategies on the fly. This necessity to pivot has impacted how businesses manage their workforce. In some industries we have seen layoffs and terminations as public health restrictions brought business to a halt. In other industries, these same changes brought about widespread hiring as certain kinds of businesses had to ramp up to meet newfound demand. This happens in waves, which have their peaks and valleys. In recent weeks, we have seen news of companies that hired based on where they thought things were going, only to find themselves long on talent and short on revenue. As a result, they made the difficult decision to terminate segments of their workforce. While most of these terminations involved active employees, some of them involved revoking offers of employment that had been accepted. While we are all quite familiar with how termination entitlements play out for those with service time, what happens to the incoming employees whose employment ends before it starts?
A valid employment contract creates an employment relationship even where the actual work has not begun before the contract is cancelled. As such, just like the long serving employee, the victim of a rescinded offer of employment is entitled to reasonable notice for the employer’s breach of contract in this circumstance. The employee had accepted a job offer, likely resigned from their current job and now finds themselves unemployed. Courts will assess damages in such a case just as they do in the wrongful dismissal of a long serving employee, in part by looking at the ‘Bardal’ factors. These factors include, but are not limited to, the character of employment, length of service of the employee (which here would relate more to that of the job they were coming from), age of the employee and the availability of similar employment. Courts will also look at the employment contract itself and what clauses it contains with respect to termination. Given that the period of employment has not started, the Courts have been clear that employers cannot take advantage of any probationary terms to reduce or avoid liability. Damages for reasonable notice will be awarded at the salary or wage rate contained in the contract with the employer who rescinded the contract.
Employers still receive the benefit of mitigation in these circumstances. Should the employee find another job during the time period that a Court determines the reasonable notice damages to cover, the employer will get a credit for the income earned during the overlap. This can significantly reduce the employer’s liability.
In addition to damages for reasonable notice, the prospective employee may be entitled to special damages for other losses arising from having accepted and relied on the job offer. These can range from nominal damages for small out of pocket expenses, more significant amounts related to the loss of pension and benefit entitlements and potentially significant damages related to relocation costs where the prospective employee moved residences or even cities as a result of taking the job that has been revoked.
Accepting a job is a significant life decision for many people, especially where they are coming out of a position with an employer they have been with for some time. When someone takes a new job, they may be giving up the stability of the job they are coming from based on the promise of what they were offered. Sometimes they uproot their whole life for an opportunity. As such, when an accepted offer is rescinded, the employer will be liable for breaking its promise. This is not a decision to be made lightly by the employer given the potential liability.