Sometimes an employer seconds an employee to work for a period of time for another organization (the host). This arrangement can develop business relationships between the employer and host, encourage shared expertise between the host, and improve the skills or knowledge of the employee. 

During the secondment, the employee remains employed by the employer. The arrangement is normally underpinned by a written secondment agreement that varies the employee’s employment agreement. Does the secondment agreement constitute an employment agreement? 

In some circumstances, such as when the secondment is terminated before the conclusion of its term, this may be important. This article looks at the recent decision of the Court of Appeal for Ontario in Nader v University Health Network, in which a man terminated without cause during a secondment sued for wrongful dismissal seeking payment for the balance of the term remaining under the secondment agreement.

Plaintiff could be terminated from his employment without cause if paid 12 months’ salary

The plaintiff had been employed by University Health Network (the employer) as an Executive Vice President since 2016. His employment agreement provided for a base salary, and eligibility for a performance bonus of up to 25% of the base salary, along with other benefits.  

The employment agreement allowed the employer to terminate the plaintiff’s employment without cause upon payment of 12 months’ salary. 

He was seconded for a fixed term of two years and had a detailed secondment contract

In July 2019, the plaintiff agreed to be seconded to Ontario Health (the host) to fill a role temporarily. There was an agreement signed between the employee, the employer and host. This secondment agreement provided that the plaintiff was to be seconded for two years from September 3, 2019, to August 31, 2021.

The agreement stated that the plaintiff would remain an employee of the employer and that the employer would continue to pay his salary. The employee’s other entitlements, including bonus payments, continued to accrue during the secondment.  

The secondment agreement also dealt with termination. It provided that the employee would return to his existing Vice President position at the employer or a comparable position. If this no longer existed, the contract said he would receive the termination entitlement provided by the employment agreement. 

The host terminated the secondment prior to the end of the two-year period

In September 2020, the host told the plaintiff and the employer that the secondment would end in October. In the meantime, the employer had hired a replacement for the employee and found no comparable positions available. As a result, the employer terminated the employee’s employment without cause and provided the employee with 12 months’ salary.

The employee sued both the employer and the host. He argued that the secondment agreement was a fixed-term employment contract and due to the early termination, he was entitled to be paid for the balance of the term. This was in addition to the termination payment he had already received under the employment agreement. 

The plaintiff also sought a bonus of 25% of his salary for the year he was paid post-termination. 

The secondment agreement contemplated termination, but what was the consequence?

Justice Black found the agreements clear and unambiguous. His Honour decided that the secondment agreement contemplated termination before the end of the two years. Specifically, the agreement said it was for two years “subject to early termination in accordance with this agreement.”

The plaintiff pointed to authority stating that early termination of a fixed-term employment contract, in the absence of a predetermined notice period specified in the agreement, meant that the employee was entitled to be paid the wages they would have received until the end of the term.

The employer pointed to several cases in support of its argument that the secondment agreement was not an employment agreement, so this principle did not apply. In any event, the employer argued that the secondment agreement allowed for early termination.

The secondment agreement was not a fixed-term employment agreement

Justice Black said:

“These cases appear to confirm that, against the backdrop of a continuing employment agreement, pursuant to which the original employer evinces an intention to remain the employer and retain responsibility for salary and benefits, a secondment agreement is not itself an employment agreement, but something other, and in its own category.”

In addition, his Honour found that the secondment agreement contained a predetermined notice period. This was because it specified that in the event of termination without cause, the employee was entitled to 12 months’ salary as provided in the employment agreement. 

As a result, the Court found that the plaintiff was not entitled to the balance of the two years under the secondment agreement. Regarding the bonus, his Honour found that it was a discretionary performance-related payment and there was no evidence on performance or whether he would have been eligible. As a result, the Court dismissed this claim.

Court of Appeal agreed the plaintiff was not entitled to the balance of the secondment agreement, but gave him a bonus

The plaintiff appealed. The Court of Appeal agreed that the judge’s findings that the plaintiff remained employed by the employer, the secondment agreement was not an employment agreement and the secondment agreement contemplated early termination were all acceptable. Therefore, the plaintiff was not entitled to be paid out for the remainder of the secondment.

However, the Court of Appeal decided that the plaintiff was entitled to a bonus of 25% of the 12 months’ salary he received for the severance period. The Court decided that there was sufficient evidence that a bonus was a part of the compensation owed on termination, such as the fact he received 25% bonuses in 2018 and 2019. It was reasonable to infer that he would have earned the bonus.

Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Termination Entitlements and Secondment Agreements

The employment lawyers at Grosman Gale Fletcher Hopkins LLP advise both employers and employees on the termination process, including wrongful termination, fixed-term employment contracts and secondment agreements. Contact us online or at 416.364.9599 to schedule a consultation with one of our experienced employment lawyers. 


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