Sierra Systems Group Inc. ("Sierra") recruited Ruben Cuesta Munoz ("Cuesta") to work as an IT specialist for its client, Goldcorp Inc. ("Goldcorp"). During the recruitment process, Sierra informed Cuesta that his employment would be long-term. Cuesta chose to leave his prior secure employment to join Sierra. His employment agreement with Sierra was silent on termination notice or pay in lieu, but he was subject to contractual non-competition and non-solicitation obligations.
Cuesta worked for Sierra under a somewhat unique employment arrangement whereby he could be paid, at his option, under one of four different schemes – a straight salary, a fee per hour billed with no pay during down time (known internally as "being on the bench"), a 95 percent salary plus a small fee per hour billed, or a 65 percent salary plus a somewhat larger fee per hour billed. Cuesta chose to be paid for hours billed which turned out to be quite lucrative for a time. However, in June 2013, Goldcorp advised Sierra that it no longer wished to have Cuesta providing services to it. He received no further fees after June 17, 2013 because he was on the fee for service payment scheme and Sierra was unable to place him with any other client. On October 24, 2013, Sierra gave him six weeks of termination notice.
The BC Supreme Court awarded Cuesta damages based on a reasonable notice period of 10 months, which at first blush appears to be very high for a 43-year old, non-management IT employee with just 2.5 years of service. The trial judge relied on several factors, including inducement to leave previous employment, the specialized nature of the employee's skills, the non-competition and non-solicitation obligations, and the limited availability of other employment. The trial judge also found that Cuesta had not failed to mitigate his damages.
There were a number of issues on appeal, but this article will focus solely on the BC Court of Appeal's analysis of the appropriate notice period.
The trial judge found that the promise of long-term employment at Sierra was held out as an incentive for Cuesta to leave his prior employment. The Court of Appeal held that there was evidence to support that finding. It further noted that the trial judge had not placed great weight on this factor, and found no error in the lower court's reasons.
The trial judge found that the highly specialized nature of Cuesta's skills and Sierra's inability to place him in another position warranted a longer notice period. The Court of Appeal found that there was some evidence to demonstrate that Cuesta's skills were not easily transferable. He had only worked for one client while at Sierra and, in addition, Sierra had been unable to place him with another client after June 17, 2013. On this basis, the Court of Appeal upheld the trial judge's finding.
Non-competition and non-solicitation obligations
The Court of Appeal confirmed recent case law to the effect that non-competition and non-solicitation clauses may increase the length of a reasonable notice period. Moreover, the Court confirmed that an employee need not prove that such restrictive covenants actually affected his or her ability to find work. Instead, the focus is on whether the employee believed they might limit his or her ability to do so. The Court thus agreed that the restrictive covenants applicable to Cuesta justified an increased notice period.
Availability of other employment
The trial judge determined that the inability of Sierra to find alternate client work for Cuesta was evidence that there was a general shortage of work opportunities for Cuesta. The Court held this to be in error since there was not necessarily a link between Sierra's ability to place Cuesta with a client and Cuesta's ability to find subsequent work. The Court noted that if an employee wishes to establish that the notice period should be increased due to a shortage of work opportunities, he or she has to introduce evidence to that effect. Since Cuesta had tendered no such evidence, he had not met the onus on him, and the trial judge's decision was overturned as having no evidentiary foundation.
The Court then had to determine what impact that error should have on the appropriate notice period. The Court noted that the trial judge recognized the notice period to be on the high end of the range, which deserved some deference. However, given the significant weight placed at trial on the erroneous finding of a scarcity of alternate employment, the Court decided to reduce the notice period to eight months.
Lessons for employers
This case serves as a reminder of the need to displace the common law obligation to provide reasonable notice of termination through properly drafted and enforceable termination language in the contract of employment. Each of the factors that led to an increased notice period in this case would have been irrelevant had Sierra and Cuesta agreed in writing to a specific and enforceable termination provision.
More specifically, the inducement issue could have been addressed through a combination of appropriate termination language and an entire agreement clause which displaced any future claims in contract or tort based on representations about the ongoing or long-term nature of the employment.
Likewise, such contract language would have rendered meaningless the plaintiff's arguments about his specialized skills, his limited employment opportunities or the restrictive covenants.
Undoubtedly, Sierra must have been surprised by the length of notice the trial judge deemed appropriate for a middle-aged IT professional with only 2.5 years of service. This led it to incur additional expense in attempting to appeal the trial judge's decision. Fortunately, with a little work up front to draft and implement enforceable termination language in a contract, employers can avoid significant headaches and costs.
Previously printed in the LexisNexis Labour Notes Newsletter.
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