Wrongful Hiring ? Employers must be careful

The hiring process is very much like a traditional courting ritual – human or animal. Chests are puffed up to exaggerate power and prestige. Weaknesses are downplayed, strengths are inflated.. Employees will always put the very best spin they can on the responsibilities they have held and their past achievements. Employers will continue to portray to all job candidates that it could not be a more secure and supportive environment in which to work. While this has always been so on both sides of the interview table, more often than not it is employers that pay the price if significant misrepresentations take place
For a man we will call Adam, the employer’s representations went too far and with dire consequences. Adam had been securely employed as an accountant in a well-paying job for many years. He was a little bored, however, and looking for a new challenge. He applied to a company that was looking for an accountant to help develop a new product line in accounting software.
During the interview, he was told that the software would be developed over a two-year period and that the position he was interviewing for would be needed during that time and after for enhancements and maintenance of the software. What Adam was not told was that the funding for the entire project had not yet been approved by the upper brass. He didn’t know that the cart was being put before the horse since the entire enterprise was not yet a sure thing. Based on what he was told, however, he resigned his job in Calgary and moved to Ottawa. Five months later he was told that the funding had not been approved and was given a new job. Very soon after, he was terminated.
Adam sued the company for negligent misrepresentation. This is different from a wrongful dismissal suit. Wrongful dismissal suits obtain for the employee pay in lieu of reasonable notice primarily based on their age, seniority and level of responsibility. If they were induced to leave secure employment, their seniority from the old job may be taken into account.
Adam’s lawsuit, however, was not claiming that he should have been given more pay in lieu of notice when he was terminated, but rather that he should not have been hired in the first place. It was, he claimed, not a wrongful firing, but a wrongful hiring.  
Before Adam accepted the job, however, he had signed a contract with the new employer which said that his job could be changed with one month’s notice and he could be terminated with one month’s pay in lieu of notice in addition to any minimum provisions of Employment Standards legislation.
The employer argued that this clause in the contract meant that Adam should have known that things can change and that he should not be able to sue for more than what was in the contract. He knew the risks he was taking in leaving a secure job when he signed a contract limiting his entitlement to pay in lieu of notice if he was ever terminated.
What the contract was missing, however, was a clause saying that the contract contained the entire agreement and that neither party was relying on any other promises or representation, whether they were made verbally or in writing. 
The court found that the contract Adam signed did not save the employer from the fact that they hired Adam for a job that did not really exist. If the job had really existed, the contract would have been enforceable.
The court recognized that employees are often at a disadvantage in the bargaining equation. They are completely reliant on the information provided by the employer. Adam, believing that the job for which he was being hired actually had the funding approved, was willing to take the risk that if things didn’t work out, he would be limited to the pay in lieu of notice in the contract. If Adam had been told, however, that there in fact was no approved funding for the job and it wasn’t certain the whole project would go ahead, he would never have left his secure job in Calgary knowing that all he would get if it didn’t work out within the next two years was a few months’ pay in lieu of notice at best.
One of the big differences between a wrongful firing and a wrongful hiring suit is the damages that are awarded. The employer had made a negligent misrepresentation and Adam had relied upon it to the detriment of himself and his family. He had the right to be put in the same position he would have been in if the representation had never been made.
In theory, an employee who is successful in a negligent misrepresentation/wrongful hiring case can be compensated for all lost wages until they find new employment. They have to, of course, make reasonable efforts to find that new employment. In Adam’s case, after less than a year of employment, he was awarded  a year’s lost salary for the time it took him to find a new job, moving expenses back to Calgary and $5000 for mental distress.
Granted, cases like Adam’s are not that common. Employers don’t usually go to the trouble of hiring for positions they are not sure they even want, but it happens.   Employers and employees can, as they always have, continue to puff and strut and play the dating game but should be careful about going too far.

Ed Canning is a partner practicing in the Labour & Employment Group at Ross & McBride LLP.

As published in the Hamilton Spectator, April 12, 2008
Ed Canning
Ed Canning
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