It may seem odd that an employee who has yet to start work is owed a severance sum. This, however, is the law. If a person is offered employment to start, for example, on October 1, and is advised that they are no longer required on September 15, there will still be a possible claim. This claim may be more emphatic where the individual has resigned from prior employment, in anticipation of the new employment.

The extent of reasonable notice to be given will vary with each fact situation. There will still be an obligation on the employee to seek out new employment or “mitigate” the damage claim. In a situation where the person is employed when the new offer was made and has not resigned this employment, there will likely be no damage claim, presuming the income sums are the same.

Recent Precedent

One recent case awarded 6 weeks’ compensation.[1] The employee was offered a new position as a senior software engineer. He had also resigned from a secure position to accept the new job. Three days before the job started, he was advised that the job no longer existed. The employee had signed a contract that contained a probation period of three months allowing for termination in this time period without compensation. This clause was not effective in defending the case as the employment relationship had yet to begin. It was intended to monitor performance issues, not to defend against termination in this context.

The claim for damages could have been more severe. It was likely limited to 6 weeks as this was the time period of the employee’s unemployment.

“Tort” Claim

In this situation, an employer could also be sued for negligence by offering a position of employment where the new job is in danger of being eliminated when the offer was made. The actual term is “negligent misrepresentation”. Damages tend to be higher when this claim is asserted. The claim could include moving costs if relevant, and emotional distress damages.[2]

Tax Questions

What was not addressed in this case is a twist of tax law. Damages for wrongful dismissal before employment begins are not taxable, a bit of a bonus to the employee.[3]

Employers’ Diligence

Employers should be cautious about representations in the hiring process which could add to the damage claim where there has been detrimental reliance by the employee, such as resigning from a secure position.

Employees’ Take Away

This issue is a good example of what sound legal advice can offer. Most employees are unlikely aware that a remedy may be available for wrongful dismissal in this context, or the tax implications if they were to receive damages in a similar case.

Get Advice

If you have questions about these or other workplace issues, contact the offices of Toronto employment lawyers Grosman Gale Fletcher Hopkins LLP. We regularly advise employees and employers on issues in the workplace. Contact us online or by phone at 416 364 9599 to schedule a consultation.

[1] Buchanan v Introjunction This was also the time that the plaintiff was unemployed

[2] Queen v Cognos In this case, employment actually started but the concept could still apply to the facts discussed here.

[3] Schwartz v Queen