Outside Interference – LM Issue 991

Business in Vancouver: Legal Matters - Issue 991

Column: “Employment Issues” - October 25, 2008

Written by: Robert Yeager

Outside Interference

What happens when an outside party interferes with a contract of employment between employer and employee? This question was recently addressed in a Supreme Court judgment.

The employee was the chief administrative officer of the employer, and had been so for 6 years. The employer was a local self-governed association that had links to a larger provincial body. It was the employer, the local association, that had specifically hired the employee at the inception of the employment. The larger provincial body had had nothing to do with this employment until the time of the termination.

In the mind of the employer, issues arose as to the performance of the employee. To address the employment issues, the employer convened a meeting of its board of directors, and invited members of the larger provincial body to attend and give input. As a result of the board meeting, a decision was made to discipline the employee by suspending for a month with pay. A letter was delivered to the employee to this effect. The letterhead of this letter was that of the larger provincial body, not that of the employer.

A month into the suspension, the board of the employer convened again, and made a decision to terminate the employment, and to base this termination on allegations of just cause, thereby allowing the employer to escape the requirement of giving reasonable notice of the termination.

The termination letter that was delivered by the employer to the employee was written on the letterhead of the larger provincial body, not the employer.

Predictably, there was a lawsuit about all this. The employer failed to prove just cause, in fact the court found there was scant basis for the allegation of just cause, and the employee won her wrongful dismissal lawsuit against the employer.

Turning to the matter of the third party, the larger provincial body, and its role in the termination, the court found the larger provincial body had unlawfully interfered with existing contractual relations, and were thereby liable for damages in this wrongful dismissal, together with the employer. In fact, the court went further and also found a common employer to exist, being the combination of the local association and the larger provincial body, based on the fact the larger provincial association essentially took control of the dismissal of the employee. The court found the larger provincial body jointly liable together with the employer for the damages and the wrongful dismissal of the employee.

This is not the first case of this sort. The legal principle has existed in the common law as far back as 1843, and has been honed and developed by the common law courts ever since.

A third party to a contract of employment between an employer and an employee can be held liable for unlawful interference with contractual relations that causes damages to the employee. Where a third party interferes such as to cause the employment to be terminated against the will of the employee and in a way that constitutes a wrongful dismissal, the employee has suffered damages and can pursue the third party for these damages.

What is required? First, there must be a valid and enforceable contract. Second, the third party must have knowledge of the existence of the contract. Third, the contract must be breached through the intentional actions of the third party, what the law calls a procurement of the breach. Fourth, this interference must be wrongful, there cannot be a lawful excuse for it. Fifth, the employee must have suffered some sort of damages. Where the dismissal is a wrongful dismissal, the employee will certainly have suffered damages, fulfilling this fifth requirement.

In fact, it is possible for the employee, wrongfully dismissed by the employer through the procurement of a third party, to sue the employer in contract for the dismissal, and the third party for unlawful interference for any additional damages beyond those in contract. Where the employee can prove an actual loss suffered in addition to contract damages, the third party may be liable.

It should be noted, a director of a company who gives reasonably founded input about an employee that results in a dismissal will not be held liable for that because the law considers it is part of his or her duties as a director.

A note of caution. Contracts are two-way streets involving employees and employers. Where outsiders unlawfully interfere with the contract, the injured party to the contract may have a claim in damages against that outsider. This could just as easily work in favour of the employer, in situations where an outsider induces its employee to end an employment contract in a way that causes damages to the employer. Food for thought for industry competitors and headhunters.

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