Let’s Go Find the Wrong Person – The Costs of Terminating a Recruited Employee

Previously printed in the CCH’s Focus on Canadian Employment and Equality Rights Newsletter.

In a recent decision, Rodgers v. CEVA, 2014 ONSC 6583, an Ontario employer paid a high price for terminating a senior employee who had been recruited with an attractive job offer.

Background Facts

Bruce Rodgers (“Rodgers”) was the President of Sameday Worldwide, a company which handled transportation of goods. In 2009, he was recruited by CEVA Freight Canada Co. (“CEVA”) to become its Country Manager. Rodgers was earning a salary of $189,000 plus a bonus with Sameday Worldwide. After being flown to Houston twice, attending a total of seven interviews, and meeting the CEO of CEVA’s global parent company, Rodgers was presented with an offer of employment. He turned it down. He was then made a second offer with a higher salary and signing bonus, which he accepted. Rodgers was also told that he was required to purchase shares in the company in order to demonstrate his commitment. The cost of the shares purchased by Rodgers was $102,330.85.

A little less than three years later, Rodgers was dismissed from CEVA without cause. He was paid two weeks of salary in lieu of notice plus severance of just under one additional week and outstanding vacation pay. Rodgers’ contract of employment provided that he could be terminated upon notice or pay in lieu of notice “based on [his] length of service and applicable legal requirements”.

Rodgers commenced a wrongful dismissal action against CEVA and argued, in part, that he was induced by CEVA to leave secure and long-term employment with Sameday Worldwide. Rodgers alleged that in the circumstances, he was entitled to damages equivalent to 18 to 24 months of notice, less mitigation earnings.

Decision

CEVA argued that Rodgers’ entitlement to notice or pay in lieu of notice based on “length of service” was a distinct consideration from “applicable legal requirements”. While the Court acknowledged that Rodgers’ short length of service was a relevant factor, it found that it did not warrant any particular weight because the employment agreement was not clear that length of service would trump all other considerations. The Court held that if the parties intended for length of service to be accorded more weight than any other factor in determining the appropriate notice period, it was incumbent upon CEVA to make this clear to Rodgers. There was no such evidence in the case before the Court.

The Court focused on the way in which Rodgers was recruited to the position of Country Manager. It stated:

The recruitment of the plaintiff by the defendant when he was employed in a senior position of significant length of service is also a factor tending to increase the period of notice. Against those factors is the short period of time that the plaintiff was employed by the defendant. However, I have concluded that both parties to the employment contract contemplated, at the commencement of the employment relationship, that it would be a long one. Specifically, I do not believe that either party thought of [sic] the plaintiff’s employment could be terminated after approximately three years of service upon payment of two weeks’ salary in lieu of notice plus severance pay in the approximate amount of $5,000.

In the circumstances, the Court found that an appropriate notice period was 14 months. This equated to a payment of $428,246, less Rodgers’ mitigation earnings of $82,261.

Lessons for Employers

This case serves as an important reminder to employers that even where job security is not explicitly promised, or even discussed, the method of recruitment can be viewed by the Court as an implicit promise of job security. Here, the Court noted the “attractive” financial package which Rodgers was offered, and the fact that this was an improvement over the original offer which he declined. The Court was also persuaded by the fact that Rodgers was forced to make an investment in the company, giving him the impression that he could expect above-average job security. As such, Rodgers was “induced” to join CEVA and deserved a longer notice period.

While there were certainly other factors at play in the Court’s decision with respect to the reasonable notice period, e.g. Rodgers’ age and his high level of responsibility, the Court was clear that CEVA’s recruitment of Rodgers from a secure, long-term job was a factor contributing to the lengthy notice period awarded.

Employers must be cognizant of the efforts they make to convince someone to leave prior employment, and ensure that any resulting offer of employment includes an appropriately drafted termination provision which is clearly communicated to the employee.