In Kim v. BT Express Freight Systems (2020), 317 A.C.W.S. (3d) 255, Ontario’s Superior Court confirmed that an employer may be liable for damages if it withdraws an accepted offer of employment or terminates employment without cause prior to the start date. 

Background

Total Express Global Supply Chain Solutions (TE) employed Kim at $50,000 per year.  Kim was not searching for another job, but his resume was posted on a job search site.  BT Express Freight Systems (BTE) noticed the resume and offered Kim a job at $80,000 per year, with the possibility of advancement, assuming that a three-month probation period was satisfied.  Kim accepted the BTE job and advised TE accordingly.  Five days prior to Kim’s start date, BTE sent him an email “terminating/withdrawing” the offer and apologizing for “any inconvenience this has caused.”  BTE did not provide him any notice, explanation, or compensation.  Although Kim had already been replaced at TE, his former employer allowed him to stay a week longer than planned.  Kim found a new job that paid $52,000 annually, which he began 10 weeks after leaving TE. 

Kim brought an action against BTE seeking general damages equivalent to nine months’ salary for breach of contract/wrongful dismissal, “punitive, aggravated, Bhasin,¹ and/or moral” damages on the basis that BTE behaved dishonestly, and costs.  BTE did not defend the action. Kim brought a motion for default judgment and the facts pleaded in his statement of claim were deemed to be admitted. 

Decision

The court was satisfied that Kim entered into an employment contract with BTE, and that BTE breached that contract by unilaterally terminating it without cause and without notice.  It emphasized:

A valid employment contract creates an employment relationship even before any work begins.  An employee is entitled to reasonable notice for breach of that contract, and may sue for damages if appropriate notice is not given. (para. 11)

The court noted that whether “viewed through the lens of wrongful dismissal or repudiation of contract,” the following were relevant to an assessment of damages:

• The factors set out in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140, for assessing the reasonable notice period: character of the employment, length of service, age, and the availability of similar employment, considering the experience, training and qualifications of the employee;

• The terms of the employment contract, including the existence of a probationary period and its length (probation).

While the court also stated that probation is relevant to an assessment of damages, in this case, probation was not applicable because Kim was never given the opportunity to start the BTE job. 

The court awarded damages equivalent to three months’ salary at BTE; however, damages for the last two weeks of the three months were reduced by income from new employment.

In considering the Bardal factors, the court noted:  Kim was 37; he worked for TE as an import supervisor for 20 months at $50,000 per year; he was not searching for another job but was induced to change jobs on BTE’s promise of a higher salary and the possibility of advancement; and he was able to find another job at $52,000 per year 10 weeks after leaving TE.  In considering the terms of Kim’s employment contract with BTE, the court noted that it contemplated long-term employment on the terms described above. 

The court declined to award Kim additional damages as it did not agree with his argument that BTE dealt with him dishonestly.  The court did agree that Kim “was not treated properly by BTE”; however, that was fully addressed by the damage award. 

Bottom Line for Employers

Kim v. BT Express reminds employers that once they enter into a valid employment agreement, an employment relationship exists even before the employee begins to perform work.  Even before the start date, an employee is entitled to reasonable notice for breach of the employment agreement unless an enforceable termination clause in the employment contract provides otherwise.  If appropriate notice is not given and the circumstances permit, the employee may successfully sue for damages. 

Accordingly, before making an offer of employment, an employer should have a high degree of certainty that no circumstances exist that might require it to rescind the offer.  However, should unforeseeable circumstances arise that require an employer to withdraw an employment offer or terminate the employment before the employee begins to work, the employer should offer a sum of money in lieu of reasonable notice, unless the employment contract contains a valid termination clause stipulating otherwise.  To determine how much to offer, the employer should consider the Bardal factors and the terms of the employment contract.  If the contract contains a probationary period, then its existence and length are relevant to what damages are appropriate; however, probation need not be factored into the analysis if the employee has not begun to work.  Furthermore, if the employee was not conducting a job search and the employer induced the employee to leave their existing position, this should also be considered, as should the question whether the employee has already resigned.  If the employer offers an acceptable sum in lieu of reasonable notice, it can avoid a court ordering reimbursement of the employee’s costs in a legal proceeding.  Ultimately, employers can help protect themselves by including in their employment contracts enforceable termination clauses that remove their employees’ claims to common law reasonable notice.