For some time, the employment relationship has been held to a
standard of good faith and fair dealing, at least in respect to the
administration of the employment contract and especially upon
termination of employment. Cases from the Supreme Court of Canada
Keays v. Honda have left the law of employment with a
residual philosophy that fair dealing is expected of employers. All
of which sounds sensible and kind of obvious to those who manage
human resources. This is not so clear in the world of commercial
contracts and recent developments in this area may have
repercussions for employers.
Only recently was the organizing principle of good faith in
contractual relations generally recognized by the Supreme Court of
Canada. In the 2014 Bhasin v. Hrynew decision, the Court introduced a
general duty of "honest contractual performance" that was
expressly stated to apply to all categories of contractual
Antunes v. Limen Structures Ltd, the Court made use of
this new general approach to contractual duties to award some
interesting remedies to Mr. Antunes in a wrongful dismissal case.
If this case is upheld and finds support in subsequent decisions,
some relatively clear lines in the law of employment will be
blurred until further clarification is delivered.
Mr. Antunes was hired as a senior project manager and promised
at least 12 months' severance as well as shares in the company
worth 5% or approximately $500,000 (if the spitball valuation
represented to him pre-employment was to be believed). Mr. Antunes
did believe the employer's valuation, and he commenced
employment thinking he would be entitled to that chunk of
Not only did the shares in the company never materialize, but
Mr. Antunes was fired five months after he started work.
After a 3 day trial, the Ontario Divisional Court awarded Mr.
Antunes eight months of common law damages and $500,000 in damages
for the false contractual promise related to the shares. The Court
cited Wallace and Keays v. Honda and, notably,
the Bhasin case as well, stating that "a party to a
contract must be able to rely on a minimum standard of honesty from
the contracting partner in relation to performing the contract,
with the reassurance that if the contract does not work out, they
will have a fair opportunity to protect their interests."
Because of the false pre-contractual statements, Mr. Antunes was
denied the opportunity to protect his interests, which was the
expected value of the shares, and damages flowed from that
What Might This Mean For Employers?
While reasonable in light of the expectations created by the
employer's representations and the fact that Mr. Antunes
advanced a claim of both breach of contractual and negligent
misrepresentation, the result in this case arguably marks a
departure from earlier approaches taken by the courts to
pre-contractual representations in hiring.
The difference is in the way the remedy is calculated:
previously the courts awarded tort damages which are intended to
return the person to their pre-representation state, imagining the
financial situation of the person had the false statements never
been made. Contract damages, such as those awarded in the
Antunes case, are intended to compensate for the value of
the broken promise and are based on the expected benefit. The
economic outcomes in litigation can be different.
Thus, while the "general duty of honest performance"
imported by the Supreme Court of Canada into the general law of
contract may seem like motherhood and apple-pie in the law of
employment, the wider avenues that may emerge for arguments about
damages flowing from unfair, dishonest or other improper behavior
by employers could make outcomes in employment litigation less
predictable until the subtleties are clarified by the courts.
The Antunes case is under appeal. In the meantime, in
an era where recruitment for skilled positions is cut-throat, this
case highlights the need for employers to develop and execute a
clear plan to guide recruitment and hiring. Employers should give
careful consideration to the message it is delivering to
candidates, rather than shooting from the hip from a philosophy of
selling the role and closing the deal. Careful and conscientious
recruitment is not only a best HR practice, but also a tool to
manage legal risk that is growing higher and higher every year.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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