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Negligent misrepresentation in an employment contract.

After 14 years of service with his employer, Norman was having coffee with Albert, a co-worker, and was surprised when Albert told him that the co-worker had been allowed to purchase back some of his years of service in England before commencing employment in Canada.

Norman had worked in his native Australia for twenty years before commencing employment in Canada. When he attended the sign-on interview on his first day with his Canadian employer, Norman entered believing he could not buy back his Australian service and left the meeting with the same understanding. However, this was not correct as his employer had recognized the Australian pension plan for a number of years prior to hiring Norman.

Over the next three years, Norman pressed his employer for relief, but his employer took the position that failing to provide advice was not a negligent misrepresentation. Norman went to court and the court found that a negligent misrepresentation had occurred.

In Issue 22-3 of LawNow, W. Douglas Johnston discussed the Cognos case that sets out the test for establishing claims for negligent misrepresentations and its application with respect to the hiring interview. Five general requirements must be met before liability will be imposed for negligent misrepresentation. These are the following:

* there must be a duty of care based on a special relationship between the parties;

* the representation must be untrue, inaccurate, or misleading;

* the defendant must have acted negligently in making the representation;

* the plaintiff must have reasonably relied on the misrepresentation; and

* the plaintiff must have suffered some loss or damage.

This article will discuss four cases that have considered the law of negligent misrepresentation in employment since the Cognos case.

In Norman's case, the courts found that each of these elements of the test had been satisfied and he was awarded damages to put him into the same position he would have been in if he had received proper advice regarding the buy-back of his Australian service on his first day at work in Canada. This case is a decision of the Federal Court of Appeal, Spinks v. Canada, 1996.

The second case, Landry v. Pratt & Whitney Canada, 1996, was heard by the Court of Queen's Bench of Alberta. Mr. Landry applied for a job at the defendant's new plant in Lethbridge, Alberta. While still living and working near Montreal, he went to a first interview in Lethbridge.

After this interview, Mr. Landry returned to Quebec and quit his job; his wife resigned from her nursing position, and they moved to Lethbridge.

In applying the test as set out in Cognos, the defendant admitted that a special relationship existed and that damages had been suffered by the plaintiff, but denied that any promises of employment had been made to Mr. Landry.

The Alberta Court found that Pratt & Whitney Canada had not told Mr. Landry he had employment with them. Thus, the second part of the test had not been met, and the claim was dismissed.

In the Ontario case of Lenarduzzi v. P.B.N. Publishing Ltd. 1995, the three plaintiffs were each working elsewhere when they were approached by the defendant with job offers and representations that they would earn substantially more with the defendant. After about one month of service, the three plaintiffs were dismissed without cause or notice.

While not specifically referring to the Cognos decision, the Ontario Court awarded each of the plaintiffs damages for the negligent misrepresentations of the defendant which enticed them to leave their existing positions for employment with the defendant.

In another Alberta case, the alleged negligent misrepresentation was to have occurred at the time the employment relationship was being terminated. The plaintiff, Blain Greenley, had worked for Xerox Canada Ltd. for 24 years. Due to corporate restructuring, his position was eliminated. Due to his lengthy service and senior position, a severance package was negotiated that allowed him to resign instead of being terminated.

The severance package included payment of the actual value of Mr. Greenley's pension account. Before Greenley accepted the package, the employer advised that the pension account was $439,291.17. He accepted the package. Subsequently the defendant determined an error in the calculation of the value of the pension account. The actual value was $238,007.68. This sum was transferred to the plaintiff.

The plaintiff sued claiming negligent misrepresentation and breach of contract.

The Alberta Court dismissed the action. It was admitted that the first four elements of the test from the Cognos case had been met, but the claim failed because there had been no detriment or loss to Mr. Greenley. He had already chosen to resign. If he had not resigned, he would have been terminated on the same terms. Therefore, no enticement had occurred.

The breach of contract claim also failed because the error constituted a mistake made by both parties known in law as a "common mistake" which entitled the employer to relief. The negotiations were not as to the amount of the pension account. The parties were merely attempting to determine the amount. The plaintiff could not take advantage of the error, Greenley v. Xerox Canada Ltd. 1997.

Summary

These four recent cases demonstrate that the Canadian courts are actively applying the five-part test as set out in the Cognos case in situations involving employers and employees.

While the existence of an employment relationship will usually be sufficient to establish the "special relationship" needed to satisfy the first element of the Cognos test, the courts are insisting that a plaintiff satisfy on the evidence each of the five elements or parts before allowing a claim based on negligent misrepresentation to succeed.

Brian P. Rurka is a partner with the firm of Walsh Wilkins in Calgary, Alberta.
COPYRIGHT 1998 Legal Resource Centre of Alberta Ltd.
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Copyright 1998 Gale, Cengage Learning. All rights reserved.

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Author:Rurka, Brian P.
Publication:LawNow
Date:Oct 1, 1998
Words:953
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