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Good faith matters

Peter was offered a job as an independent contractor with a consulting company that was to last six months. The consulting company was providing technical services to a large retailer. In its agreement with the retailer, the consulting company understood that it was not to send any consultant, like Peter, who had a criminal record, except with the retailer’s consent.
Peter told the consulting company before he quit his old job and signed a contract that he had an assault conviction from high school. They did not seem concerned and Peter started working for the retailer.
When his security check came back the retailer saw it and told the consulting company to replace Peter. They did.
The agreement that Peter signed indicated that the consulting company could terminate the six-month contract without notice if it decided it was in its best interests to replace him.
Peter sued for the other five months’ pay under the contract he never got to work.
Peter’s evidence was that he understood the clear wording of the clause above but he signed it because he trusted the consulting company not to terminate the contract for a frivolous reason. Ultimately, the trial judge and the Ontario Court of Appeal agreed with Peter. The consulting company was obliged at law to only terminate the contract in good faith. Peter knew that nothing was for sure until his security check was finished but he already disclosed the only roadblock, his ancient assault conviction.
Usually a clear termination clause will be enforced. Whether you are an independent contractor or an employee, without a union, the employer does not need a good reason or any reason for the termination. This decision implies that there has to be a reason for the termination that is not frivolous. Employers write these clauses into contracts so that they are financially protected if a relationship has to be ended and that relationship may need to end for a variety of unforeseen reasons.
Neither the trial judge nor the appeal court indicated that Peter was aware when he quit his old job that the retailer was supposed to pre-approve anyone with a criminal record being sent over.
If Peter had known that the retailer had to pre-approve any consultant with a criminal conviction, he might never have resigned from his secure full-time employment to accept the engagement.
On the one hand, Peter knew perfectly well that he was leaving a job to sign a contract where he could be terminated for any reason without notice and he took the risk. He also knew that he had to go through a security check which would take time to complete. He was a big boy and took the risks.
On the other hand, he disclosed his criminal record early and the consulting company did not seem to have any concerns.
In reality, the consulting company’s decision to terminate the relationship was not even slightly frivolous. Their hand was forced by their frivolous client, the retailer
Although the judges involved never said so, I think this was really a “wrongful hiring” case. The consulting company should have warned Peter that the contract could end abruptly if the retailer did not agree to them sending a consultant with a criminal record. Obviously they knew the issue was important enough to their client to put it in their contract. They should have sought that approval before they ever sent Peter and he quit his job. The bad faith in this case was that non-disclosure. Ultimately, the lesson for employers is to be as transparent as possible in the hiring process.
Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees. Email him at ecanning@rossmcbride.com
Ed Canning publishes a bi-weekly Employment Law column in the Hamilton Spectator.  To access the library of his articles CLICK HERE
Ed Canning
Ed Canning
P: 905.572.5809