When applying for senior positions that require the trust and confidence of the prospective employer what and how must senior executives disclose about the end of their previous employment? While no one is entitled to seek or obtain employment under false pretenses, but how forthcoming must senior executives be about innuendo, unflattering, unproven or even baseless allegations. How does an individual's right to privacy guaranteed by the Quebec Charter of Human Rights and Freedoms, Civil Code affect the matter. These are some of the issues that the Quebec Court of Appeal dealt with in TransForce Inc. vs. Baillargeon, 2012 QCCA 1495.
B had been Co-President of a pharmaceutical company whose parent company, Ratiopharm, was headquartered in Germany. In July 2006, he was approached by a head hunter and enticed to apply for the number two position at TransForce, one of Canada's largest freight forwards. B was candid enough with the head-hunter in explaining his interest in the job as being linked to what he saw the probable suppression of the above-mentioned dual presidency in the very near future. He saw his Co-President colleague being the likely winner of the ensuing "beauty contest", given the latter's particular experience in the pharmaceutical industry. Indeed, B was prescient in his evaluation of the likely outcome. Matters didn't stop there, however.
Within days of the announcement of the upcoming organisational changes, the German parent received an anonymous e-mail alleging misappropriation of substantial funds during B's watch. B and two others were asked to stay away from work – in effect, a suspension with pay – in order to protect the integrity of the ensuing inquiry. B carried on his negotiations with TransForce and its recruiter without divulging the e-mail, the inquiry or his suspension. Within days, the inquiry had cleared B and his other senior colleagues of any and all wrongdoing. Indeed, as testimony would show at trial, the two other of B's colleagues who were suspended were immediately reinstated after the inquiry was concluded, and were still at the Ratiopharm, enjoying the full confidence of the German parent, when the matter came before the Superior Court many months later. On the other hand, while as a result of the inquiry all suspended executives were retroactively reinstated, without loss or prejudice whatsoever, B advised his former employer that he would be leaving to seek alternate employment with TransForce in view of the altered and diminished responsibilities brought about by the cancellation of the Co-Presidency. He also invoked his right to a very substantial severance package set out in his employment contract. Five (5) days after the German parent concluded that B and his colleagues were entirely without blame and that the e-mail that was anonymously sent was entirely bogus and without foundation, B signed on with TransForce. He began work on October 10.
On November 1, an anonymous e-mail, almost identical to the one sent to the German parent of Ratiopharm, was sent to TransForce. Immediate inquiries were made first with the head hunter and then with Ratiopharm. TransForce was informed of the suspension for purposes of inquiry, the finding that no evidence was found, whatsoever, that might impune B or his administration or that might suggest that they had engaged in any nefarious behaviour that B's two colleagues were reinstated and that B, though thoroughly exonerated, chose to leave in view of the changed administration.
Notwithstanding the above, B's employment was terminated effective December 31 2006, TransForce claiming that the details of the anonymous e-mail, suspension for purposes of inquiry, etc., had they been revealed at the time of B's hire, would have excluded him as a candidate. TransForce's consent to his employment, it argued, had been improperly obtained. B was not informed of any inquiries, hesitations, questions or reservations of his new employer TransForce, prior to his termination, nor was he given any opportunity to explain the true circumstances that had transpired.
While B was removed from his duties on November 1, 2006, he continued to receive his salary and to have use of the company vehicle leased on his behalf by TransForce until December 31st, 2006. B sued for 11 months "reasonable notice" equivalent to about $600,000, claiming termination otherwise than for "serious reason" (just cause in Quebec). TransForce immediately filed a cross-demand for some $100,000 allegedly its costs incurred in B's hiring, whose employment they claimed, was only achieved through deliberate failure to disclose essential elements which reflected on Plaintiff's character, namely the e-mail, the suspension with pay, the inquiry, etc. TransForce alleged that such non-disclosure would have affected the trust and confidence of the prospective employer. At the least, TransForce in view of these elements claimed that doubts might have been raised about the integrity of its personnel and/or hiring processes and would have created negative impressions that reflected upon the good name of the prospective employer, given that it is a publicly traded enterprise.
Having lost in first instance, TransForce pressed its case before the Appellate court.
THE APPELLATE COURT'S ANALYSIS
In its judgment the Court of Appeal phrased the essence of the case before it generally as follows:
"Is a person who is in the process of being hired obliged to divulge to his prospective employer that an investigation was launched at his erswhile employer by an anonymous and calumnious e-mail. If yes, then, in law and fact, no valid contact was ever entered into, the employment contract being null and void by reason of lack of consent. Tranforce would hence owe nothing to B and its appeal would succeed. In the reverse, and if the Court should rule that an employment contract had properly been entered into, did the circumstances in question constitute or cause to permit unilateral termination without notice or indemnity?" (Author's translation)
Was TransForce entitled to its alleged hiring costs of some $100,000?
If the circumstances did not provide cause, such that TransForce was obliged to provide B with notice or pay in lieu thereof, was the Trial Judge wrong in not taking account of the $400,000 B's former employer had paid to him as "severance" pursuant to the latter's employment contract.
Finally, could TransForce's appeal be considered abusive pursuant to Art. 524 of the Quebec Code of Civil Procedure to allow for damages in favour of Respondent in the amount of $75,000?
THE APPEAL COURT'S ANSWER:
A. TRANSPARENCY HAS ITS LIMITS
Bouchard J.C.A. first noted that the Quebec Charter of Human Rights and Freedoms as well as the Civil Code both guarantee person's integrity, dignity, honour and reputation. It followed that a candidate for hire should not be obliged to divulge calomnies and innuendo about himself. To hold the reverse would be to oblige him (i) to renounce to fundamental rights and (ii) to self-inflict what the law prohibits others from doing. Furthermore, obliging a candidate who is the object of false and calumnious allegations to divulge that he was the object of such allegations or that and inquiry ensued would open the door "toute large aux intrigants, aux esprits déranges et autres indésirables qui ont pour seule ambition de nuire, détruire ou ruiner la carrière d'autrui ou encore empêcher pour quelque raison obscure l'accession d'une personne à un emploi qu'elle pourrait légitimement convoiter."
Furthermore, the continuing obligation of loyalty and discretion B owed to his former employer to keep the existence of the inquiry and the facts and contents it revealed confidential had priority over any obligation he might have to divulge to his prospective employer all facts relevant to a reasonable assessment of his candidature. Interestingly, perhaps applying the rule that after the fact evidence is admissible to prove the truth of facts that existed at the pertinent time, a principle that flows from at least three (3) judgments of the Supreme Court of Canada1, Bouchard J.C.A. noted that false information transmitted anonymously, which a confidential inquiry confirms to be false, are not to be considered in any case information objectively relevant to the appreciation of the candidate otherwise than to exonerate him! In sum, the prospective candidate had no obligation to divulge that he was then the object of an administrative inquiry being carried out by his employer of the time, the inquiry having been provoked by baseless e-mails.
B. ABSENCE OR PRESENCE OF CAUSE
Bouchard J.C.A. held that for all the reasons above, Appellant had no serious reason to terminate B's employment unilaterally and without notice. Furthermore, the Court dismissed Appellant's position that they had (i) acted because of an assumed image problem when they proceeded with the hire, (ii) that as its TransForce's President had declared, being a public company whose shares were traded on the TSX, they had no interest in hiring someone who was the object of an inquiry of any sort, for malfeasance, whether the accusations were born out or not and (iii) the base line value of shares could be affected whatever the result of the inquiry.
This position collapsed when it surfaced that one of TransForce's own senior executives was falsely accused in Sicily of money laundering, a matter reported in the Montreal press, but had remained employed throughout. The distinction that Appellant sought to draw between the two situations – that (i) regarding its own executive the allegations were known to be false from the get-go (ii) he was a man well known in the Montreal community and within the company and (iii) hence public opinion or share price would not be affected – was dismissed as untenable by the Court.
C. NOTICE PAY
Reviewing the various factors that case law deems relevant in valuing "reasonable notice", the Appellate Court found that given the very senior nature of the position, the time that it would take to find comparable employment, in awarding an eleven (11) month notice period, the Trial Judge had committed no reviewable error. Of great interest to practitioners, the Court chose to refer to the severance package that B had negotiated with his former employer as set out in his employment contract with the latter – a package of eighteen (18) months of base salary - to be indicative of notice that is given or is to be given in the select milieu of large public companies, which Bouchard J.C.A. said "sont sans aucune mesure comparable à ceux offerts aux employés occupant des postes moins prestigieux". The fact that the position he was fired from was Executive Vice-President of the largest truck transport carrier in Canada, doing 1.8 billion dollars business a year, for the Court of Appeal was particularly instructive.
D. DEDUCTION OF SEVERANCE PAID BY RATIOPHARM FROM NOTICE OWED BY TRANSFORCE
Appellant alleged that B was being doubly indemnified by enjoying both the severance package from his former employer plus the very substantial notice pay from TransForce. This position was dismissed out of hand. Bouchard J.C.A. asked, by virtue of what principle of law can a third party take advantage of a contract to which it was never a party, in order to elude or reduce its own obligations? In its words "le contrat de l'Intimé avec Ratiopharm et celui entre l'intimé et l'appelante ne sont pas des vases communicants". While Appellant was entitled at law to terminate B's employment without notice, the exercise of that right carried with it an obligation to provide reasonable notice or payment in lieu thereof and this, independent of however rich or poor the executive being terminated was or was not, and independent of whether B's "patrimony" included the right to a substantial severance package from another former employer. Otherwise, only those who were in poverty or in dire financial straits would benefit from the public order provisions of Arts. 2091 et seq. C.C.Q.
E. TRANSFORCE'S CLAIM FOR REIMBURSEMENT OF HIRING COSTS
Notwithstanding that the "head-hunter" who had been engaged to recruit B had provided it with a guarantee of replacement for a full year in the event of termination, TransForce made no claim in that respect with the recruiting firm following B's firing. It nevertheless pursued its claim of $100,000 for hiring costs associated with B's recruitment at the Appellate level. To say that this attitude did not score "brownie points" with the Court of Appeal is an understatement of heroic proportions. Indeed, when the Court took notice of the aforementioned "guarantee" and TransForce's inaction in that respect, and its pursuit of its claim nonetheless, this became the catalyst for an award against it of $10,000 for having prosecuted what in the Court's view was an abusive appeal.
The takeaways from this case are several:
- Charter guaranteed privacy rights will trump "exaggerated" claims for "transparency" in hiring;
- Prospective hires who apply for senior executive positions are not required to self-inflict the harm that divulging unsubstantiated rumors and innuendo about them would foist upon the reputations and careers;
- Innuendo and rumors, particularly when proven false, cannot be used to support a claim of either viciated or just cause termination;
- Close and open communication between the head-hunter and the hiring company as to all that was effectively revealed by the prospective hire prior to any offer being made is certainly best practice;
- Since after acquired evidence is admissible to substantiate the truth of what existed at the relevant time, such evidence is certainly admissible to show the unreasonableness of the decision if it were available and, indeed, known or could have been known, at the time the decision was taken.
- Notwithstanding that while, as per Dunsmuir,2 "due process", including a right to be confronted with allegations and to provide explanations if available, may not be de rigueur by law, it certainly may be a matter of "best practices";
All in all, serious lessons are to be learned by all!
1 Cie Minière Québec Cartier v. Québec (Grievance Arbitrator) , 2 S.C.R. 1095; Toronto City Board of Education v. O.S.S.T.F.,  1 S.C.R. 487; Cabiakman v. Industrial Alliance Life Insurance Co.,  3 S.C.R. 195;
2 Dunsmuir v New Brunswick,  1 S.C.R. 190;
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