Short Service + Inducement Is A Costly Mix

In a recent article, Robert Smithson discusses an important legal misconception held by employers regarding termination notice for short-service employees.

Smithson explores how this decision may clarify that even short-service employees, particularly those who were induced to leave secure positions, may be entitled to lengthy reasonable notice under common law, unless a valid employment contract limits that entitlement.

The original version of this article can be found on Smithson Employment Law Corporation.

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Some years back, I published an article (“Short Service, Lengthy Notice”, https://bit.ly/4luvc8c) which addressed the commonly held misperception among employers about the amount of “reasonable working notice” owed to short-service employees. 

Employers, it seems, have clung steadfastly to the (flawed) idea that a short-service employee is owed little in the way of working notice or pay in lieu when terminated on a without-cause basis.  That is one of the most insidious misperceptions among employers, and I’ve found they are skeptical of legal advice to the contrary.

The concept that an employee who has worked for your company for less than 3 years might be owed notice or pay in lieu in the range of 6, 9, or even 12 months definitely doesn’t land well with employers.

Why Such Lengthy Notice?

First, it’s worth emphasizing that if an employee is bound by an enforceable employment contract containing a valid (i.e. Employment Standards Act compliant) termination notice/pay formula, this whole topic of lengthy notice in short-service scenarios is a non-issue.  This is one reason why recommending the use of employment agreements remains my #1 piece of advice to employers.

The source of the obligation to provide “reasonable working notice” (or pay in lieu) arises from the common law; it is an implied term in employment relationships which are not governed by an enforceable employment agreement.

And, contrary to the presumptions of most employers, the “reasonable working notice” entitlement can be quite significant if a termination occurs at the outset of the employment relationship.  In legal terms, the months-of-notice-per-year-of-service ratio tends to be much higher at the shorter end of the service spectrum (and that effect is exacerbated if the employer had induced the employee to leave stable, gainful employment to join it in the first place).

A recent B.C. decision, Mercer Celgar Limited Partnership v. Ferweda, exemplifies this “short service, lengthy notice” dynamic.

Mercer Celgar LP v. Ferweda

In essence, Ferweda was a chemical engineer by trade, and he had worked for 27 years as an operations specialist at a pulp and paper mill on Vancouver Island.  In 2018, at age 53, Mercer Celgar LP offered him a position in Castlegar.  

Ferweda accepted the offer and worked at the Castlegar pulp mill for approximately 2.5 years, at which point the employment relationship was terminated (without cause) due to downsizing. 

Ferweda’s (stated) intention, when accepting the position with Mercer Celgar LP, had been to work there until his retirement.  He wasn’t entirely happy with his employment relationship on the Island but, at the same time, he also wasn’t actively searching for a new job.

Upon termination, Mercer Celgar LP paid Ferweda the equivalent of five months’ salary in lieu of notice (which might seem quite reasonable after only 2.5 years of employment).  Ferweda, however, had other ideas.

He sued in B.C. Supreme Court for damages for wrongful dismissal and was awarded damages representing a 12-month “reasonable working notice” period.  (In effect, taking into account the initial 5 months of severance paid to him, he received 7 additional months’ compensation.)  In arriving at the conclusion that a 12-month “reasonable notice period” was warranted, the Justice stated,

[31]      In this case, I am satisfied that there was an inducement made by the employer on which Mr. Ferweda reasonably relied. Based on all the circumstances surrounding the creation of the employment contract, Celgar created an expectation on the part of Mr. Ferweda that the opportunity at Celgar was such that it would be advantageous to him to leave his secure long-standing employment and take a job which was expected to be long-term.

[32]      I do not accept the position of Celgar that there was equal interest on the part of both parties, nor that Mr. Ferweda was so unhappy at Catalyst that he was actively looking for alternate employment.

[33]      In reaching this conclusion, I find the following facts to be important considerations:

1. Celgar recruited Mr. Ferweda. Mr. Ferweda was not actively looking for a different job, nor did he respond to a newspaper advertisement. Rather, he responded to an email sent directly to him by a recruiter retained by the employer;

2. Celgar attempted to make the job attractive to Mr. Ferweda during the visit to the Celgar Mill, which was paid for by the Celgar;

3. During the Celgar Mill visit, Mr. Percy, who had previously worked for Catalyst, made statements which pointed out the aspects of employment with Celgar that were superior to Catalyst, including paid overtime, better benefits and a stable fibre supply;

4. Mr. Percy expressly told Mr. Ferweda that Celgar hired for the “long term”;

5. Mr. Belland specifically asked Mr. Ferweda how long he was prepared to commit to Celgar for, implying that the position was meant to be comparatively long-term; and

6. Mr. Ferweda did not accept the first offer, but only took the job after Celgar offered an increased salary.

[34]      Based on the totality of things said and done by Celgar at the time the employment contract was formed, Mr. Ferweda reasonably believed that he was being offered an opportunity to potentially end his career with Celgar, in a position which although identical to the one he was leaving, offered greater job satisfaction, and considerably better remuneration and benefits.

As I’ve said, the simplest solution for employers is to ensure their hiring practices include the imposition of an employment agreement containing a valid, enforceable termination formula.  That remains the single best method for employers to control their liabilities when it comes to terminating employees without cause. 

It’s worth noting that, had Mercer Celgar LP done so, it could have provided Ferweda as little as 2 weeks of working notice or pay in lieu.  Ouch.

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This item is provided for general information purposes only and is not intended to be relied upon as legal advice. Informed legal advice should always be obtained about your specific circumstances.