What is the effect of the termination of a secondment agreement if an employee expressly remains an employee of his original employer?
In Nader v. University Health Network, 2022 ONSC 447 (CanLII), the dismissed employee attempted to argue that the effect of the termination of both his secondment agreement and his employment was that he was entitled to wrongful dismissal damages from both the entity to which he had been seconded and his original employer.
Justice William Black of the Ontario Superior Court of Justice disagreed.
Facts
Mounir Nader was employed by the University Health Network (“UHN”) as an Executive Vice President, Clinical Operations, commencing in 2016. He signed an offer letter with UHN on May 18, 2016, and commenced in the role on September 6, 2016. His title was changed in 2018 to Executive Vice President, Clinical Support and Performance.
The case concerned Nader’s secondment, starting in July of 2019, with Ontario Health pursuant to an agreement made between Nader, UHN and Ontario Health dated August 12, 2019 (the “Secondment Agreement”), the termination without cause of Nader’s employment and secondment in September/October of 2020, and Nader’s entitlements to compensation flowing from those terminations.
The Secondment Agreement made between Nader, UHN, and Ontario Health provided, in material part, as follows:
1. Subject to early termination in accordance with this agreement, the Employee will be seconded from UHN to Ontario Health for a period of two (2) years from September 3, 2019 to August 31, 2021.
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6. During the period of the secondment the Employee will remain an employee of UHN on UHN’s payroll and UHN will continue to pay the Employee’s salary … and continue the Employee’s benefit coverage and pension contributions. For greater certainty, all entitlements owed to the Employee by UHN, including all pension entitlements, bonus payments, benefits and any severance accrued as a result of the Employee’s employment relationship with UHN, shall continue to accrue during the term of the secondment and shall not be impacted in any way as a result of the secondment.
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11. Upon the termination of the secondment the Employee will return to the position of Executive Vice President Clinical Support and Performance of UHN or a comparable position. If that position no longer exists at the UHN then the Employee will be entitled to receive the termination entitlement provided for in his/her employment agreement with the UHN.
12. Should for any reason the Employee be unable to return to his former, or comparable, position at UHN at the end of the two year term, which causes his termination entitlement to be activated then it is agreed that Ontario Health will be responsible for reimbursing UHN for 50% of the total cost of this severance entitlement providing such. It is understood that such reimbursement will not exceed 50% of a salary continuance that will be no more than twelve (12) months.
13. The secondment will terminate on the expiry of the term of the secondment.
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22. This agreement constitutes the entire agreement between the parties with respect to the subject matter of this agreement and supersedes all previous negotiations, communications, and other agreements relating thereto, unless specifically incorporated by reference.”
With respect to Nader’s employment agreement with UHN, it provided, with respect to termination without cause: “(UHN) may terminate your employment, other than for just cause, at any time upon payment to you of an amount equal to 12-months’ salary, which includes all your entitlement pursuant to the Employment Standards Act. It is expected that if you elect to terminate your employment with UHN, you will provide two months prior written notice, which notice may be waived by UHN at its discretion.”
Nader began the secondment with Ontario Health on September 3, 2019.
In September of 2020, Ontario Health advised Nader and UHN that Nader’s secondment assignment would end on October 23, 2020.
Nader’s position was not available at the time of the termination of his secondment. In the circumstances, UHN conducted an internal search for available jobs that were at a comparable level and compensation rate as Nader’s former position, but found none.
Given no available suitable positions, UHN opted to terminate Nader’s employment on a without cause basis and advised Nader on October 2, 2020 that his employment would be terminated without cause effective October 23, 2020.
Relying on the termination provision in the UHN Employment Agreement, UHN continued Nader’s salary for 12 months and continued his benefits over the twelve-month continuance period.
Arguments
Nader argued that the Secondment Agreement was a fixed term agreement, the termination of which entitled him to salary and related compensation for the balance of the term outstanding at the time of his termination in addition to payment for 12 months as set out in the UHN Employment Agreement for termination without cause.
The defendants argued that a secondment agreement is not an employment agreement per se, and is in its own category with its own rules, particularly when this Secondment Agreement contains explicit confirmation that the UHN Employment Agreement continues to govern Nader’s employment.
Decision of the Ontario Superior Court
In resolving that the Secondment Agreement was a not fixed term employment agreement, nor that the termination of the Secondment Agreement entitled Nader to any compensation in addition to that owing under the UHN employment agreement, Justice Black provided the following reasons for his decision:
[33] … The central issue dividing the parties is the question of whether or not the Secondment Agreement could be terminated before the end of the two years that the parties contemplated as the likely duration of the secondment, and, if so, what compensation would be required in that event.
[34] Paragraph (1) of the Secondment Agreement is clear, in my view, in contemplating termination before the expiry of two years. It says explicitly that the anticipated two year duration of the secondment is “[s]ubject to early termination in accordance with this agreement”.
[35] Nader argues that “in accordance with this agreement” is significant and that there is no explicit mechanism under the Secondment Agreement whereby it can be terminated before the end of two years.
[36] In my view, while it is fair to say there is nothing explicit providing for early termination (apart from the clear words of paragraph 1), the Secondment Agreement does implicitly but clearly contemplate such a scenario.
[37] Nader’s counsel concedes that the Secondment Agreement can be terminated before the end of two years. As he colourfully put it, there is no “indentured servitude” in Canada anymore and parties are free to terminate their employment arrangements at any time.
[38] So, in other words, the issue is not whether early termination of the Secondment Agreement is possible — clearly it is — but rather what compensation flows from early termination.
[39] Nader points to and relies on the Court of Appeal for Ontario’s landmark decision in Howard v. Benson Group (2016 ONCA 256). [See my summary of Howard v Beson group here.] Specifically, Nader emphasizes the Court of Appeal’s statement that: “Parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of notice or payment in lieu. However, and on this point [the parties] agree, if the parties to a fixed term employment contract do not specify a predetermined notice period, an employee is entitled on early termination to the wages the employee would have received to the end of term.”
[40] Proceeding on this basis, Nader argues that in the absence of an early termination provision, an employee’s rights do not revert back to common law standards of reasonable notice; rather, the employee is entitled to the balance of payments remaining under the fixed term agreement.
[41] Again quoting from Howard, Nader maintains that a fixed term employment agreement benefits the employer as much as the employee, in that it “will oust the implied term that reasonable notice must be given for termination without cause” (Howard, para. 21).
[42] The defendants suggest that it is critical to Nader’s argument that:
(i) the Secondment Agreement is an employment agreement (since Howard applies, on its face, to a “fixed term employment contract”); and,
(ii) that the agreement in question does not specify a “pre-determined notice period”.
[43] The defendants argue that Nader misses the mark on both parameters.
[44] Firstly, the defendants say that a secondment agreement is not an employment agreement per se, and is in its own category with its own rules, particularly when this Secondment Agreement contains explicit confirmation that the UHN Employment Agreement continues to govern Nader’s employment. Specifically, the defendants point to paragraph 6 of the Secondment Agreement, which explicitly provides that: “During the period of the secondment the Employee will remain an employee of UHN on UHN’s payroll and UHN will continue to pay the Employee’s salary of $362,300.00 and continue the Employee’s benefit coverage and pension contributions.”
[45] Secondly, the defendants say, citing paragraphs 6, 11 and 12 of the Secondment Agreement, that this is not a case in which no pre-determined notice period has been specified.
[46] I will deal with these two arguments in turn.
[47] In laying the groundwork for the argument about the secondment agreement not constituting a fixed term employment agreement, UHN (joined by Ontario Health) notes that Nader does not dispute that he continued to be governed by the UHN Employment Agreement throughout his secondment with Ontario Health. It says, fairly, that Nader’s position is that the court should treat him as if he were also a fixed term employee of Ontario Health during this period. The defendants submit that Nader cannot be both an indefinite term employee with UHN and a fixed term employee of Ontario Health at the same time. It cannot be, UHN argues, that an employee who has been assigned to another organization, yet who remains an employee of the assignor at all times, is entitled to “double collect” damages from the assignor for the termination of concurrent agreements.
[48] In support of this argument, the defendants each point to cases involving and interpreting secondment agreements in the setting of a pre-existing employment agreement.
[49] In Brannan v. Exxon Mobil Corporation (2009 NSCA 53), the appellant asserted that a constructive dismissal from his seconded position with Sable Energy had the effect of constructively dismissing him from his indefinite employment with Exxon Mobil. The Nova Scotia Court of Appeal dismissed the appeal, holding that the secondment was temporary in nature and that the appellant had remained solely an employee of Exxon Mobil throughout the secondment. Despite the secondment agreement, the court held, there was no concurrent employment with Sable Energy.
[50] Notably, say the defendants, the secondment agreement in Brannan included language that was similar to the agreement between Nader and Ontario Health. Specifically the agreement between the appellant and Sable Energy provided: “The Secondee will, at all times during the Secondment, remain an employee of the Shareholder [Exxon Mobil] and the Shareholder will remain solely responsible for Secondee’s salary and required deductions” (Brannan, para. 4).
[51] The court said, in considering this language, that the “secondment was meant by all parties to be transitory and project specific, and was never a sine qua non of Mr. Brannan’s underlying employment with EM Corp” (Brannan, para. 47).
[52] Comparing this finding with the case at hand, UHN argues that it is clear based on the language of the Secondment Agreement that the parties intended the secondment to be a transitory arrangement, and that therefore, applying the reasoning from Brannan, a reasonable interpretation of the Secondment Agreement supports the conclusion that Nader remained an employee of UHN, and did not enter into an employment relationship with Ontario Health, fixed term or otherwise.
[53] Ontario Health, in its factum, also cites Snead v. Agricultural Development Corporation of Saskatchewan (1990 CanLII 7410 (SK QB). In that case, the plaintiff was employed by Agdevco in an executive position. By way of a secondment agreement, Agdevco made the plaintiff’s services available to another entity, APM, for three years. When the plaintiff’s services with APM were terminated after about eight months into the secondment, he was not returned to his previous (or comparable) position with Agdevco and he sued both companies for damages for wrongful dismissal.
[54] The court found that at all times Agdevco remained Snead’s employer, and was therefore liable for pay in lieu of notice in accordance with Snead’s employment contract with Agdevco. The court held that no damages should be awarded for the remaining period of the secondment, stating: “It is here appropriate to observe that while the term seconded is not per se defined in Collins English Dictionary, or Black’s Law Dictionary, or The Concise Oxford Dictionary, in Collins English Dictionary “Second” as a verb is defined to mean: “To transfer (an employee) temporarily to another branch” and, in the Concise Oxford Dictionary, the learned author notes that “Second” is at times used to denote transfer temporarily to another department, hence – “ment.”
[55] The court found that APM (the company to which the plaintiff was seconded) was at no time the plaintiff’s employer; the secondment agreement did not create an employment relationship between Snead and APM; and, APM had no liability towards Snead upon the termination of the secondment agreement.
[56] To similar effect, in Tse v. Trow Consulting Engineers Ltd. ([1995] O.J. No. 2529 (Gen. Div.)), the plaintiff was employed by Trow and was seconded to KST. The court found that it was clear that the plaintiff’s employment was solely with Trow, with only a secondment to KST. The court noted that, while the plaintiff had an expectation that the secondment would last for three years, that expectation was dependent on his continuing employment with Trow. As the plaintiff’s employment with Trow was not for a fixed term but to continue on an indefinite basis, the plaintiff’s only entitlement was to reasonable notice upon the termination of his employment with Trow, and not to damages for breach of a fixed term employment contract with KST.
[57] These cases appear to confirm that, against the backdrop of a continuing employment agreement, pursuant to which the original employer evinces an intention to remain the employer and retain responsibility for salary and benefits, a secondment agreement is not itself an employment agreement, but something other, and in its own category. Nader has provided no cases to the contrary, rather simply assuming in his argument that the Secondment Agreement is not only an employment agreement but a fixed term employment agreement, such that Howard applies. Based on the authorities presented to me and clause 6 of the Secondment Agreement, I find that the Secondment Agreement is just that, and not an employment agreement per se.
[58] Moreover, it is not the case that, as Howard also appears to require in order for a fixed term to govern compensation on termination, there is no pre‑determined notice period provided here. Rather, both the UHN Employment Agreement and, in incorporating the relevant provision of the UHN Employment Agreement in paragraph 11 in particular, the Secondment Agreement, specify that in the event of termination without cause, Nader is entitled to 12 months’ salary as provided in the UHN Employment Agreement.
Consequently, the plaintiff’s case was entirely dismissed on this point.
Commentary
The issue of secondments, and their legal effect is a rather common issue in the Ottawa employment sphere. For some reason, the Federal government appears to have an affinity for them.
What appears clear through this decision, and those on which it relies, is that where an employee is “seconded” to another entity, but expressly remains an employee of the original entity, the termination of the secondment agreement results in no more than the conclusion of the secondment relationship not, necessarily, the termination of any employment for which compensation must be provided. Now, one supposes that it is possible that a secondment agreement could include such a compensation provision, but in the absence of such a thing being negotiated, it is pretty clear the court will not imply any such obligation.
Takeaways for Employers
The takeaway for employers is to be very clear in your intentions of who the employer of the employee will be, and the consequences of the termination of the secondment agreement.
Takeaways for Employees
The takeaway for employees is similar to that of the takeaway for employers: Know by whom you will be employed and what will happen in the event the secondment does not work out.
Contact Me
Have a workplace issue where it’s not clear who the employer actually is? Need a secondment agreement prepared? Call me. Email me. Do what works best for you.
I can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.
Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. For 2.5 years he was in-house legal counsel providing employment law advice to one of Canada’s largest corporations. He is also a part-time professor at Algonquin College teaching Employment Law. He has previously taught Trial Advocacy for Paralegals and Small Claims Court Practice.
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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
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