Secondment was not a fixed term employment agreement
In Nader v. University Health Network, 2022 ONSC 447, Nader brought a summary judgment application for damages related to his termination of employment. The key issue was the effect of a secondment for 2 years, and whether it altered, replaced, or was supplementary to an original employment agreement executed by the parties.
For reference, a secondment is a temporary assignment or move of an employee from one organization to another for a specified period, usually to carry out a particular project. A secondment can also be a transfer within the same organization or in some instances, between two unrelated business entities. Nader argued that the secondment was a fixed term employment agreement. The court determined that the secondment was not an employment agreement, but was “something other, and in its own category” and dismissed the action.
Nader was a senior executive with the University Health Network (“UHN”) in Ontario. Nader started this role in September 2016. Nader’s employment agreement with UHN (the “Agreement”) provided the following:
- annual $5,000 health care spending account;
- participation in UHN’s benefit plan;
- eligibility for an annual performance bonus to up 25% of Nader’s base salary; and
- in the event of a “without cause” termination, Nader would be paid an amount equal to 12 month’s salary.
In June 2019, Ontario Health expressed an interest to both Nader and UHN in having Nader fill the role of Interim Chief Transformation Officer for Ontario’s Health Transition Team. UHN advised Nader that there were no guarantees associated with that assignment, and that Nader’s current role with UHN may no longer be available upon his return from Ontario Health. A secondment agreement was executed in August 2019 (the “Secondment”), and Nader began the secondment assignment on September 3, 2019.
The Secondment provided the following:
- the duration would be from September 3, 2019 to August 31, 2021;
- Nader would remain an employee of UHN and continue to be on UHN’s payroll and benefits; and
- upon termination of the secondment assignment, Nader would return to his position with UHN or a comparable position and if no position was available, he would be entitled to termination pursuant to the Agreement.
Roughly a year later, in September 2020, Ontario Health advised Nader that the secondment assignment would end on October 23, 2020. During the secondment assignment, UHN hired someone to fill Nader’s role on a two-year agreement to coincide with the expected duration of Nader’s secondment. Given that there were no comparable positions at UHN at the time, UHN opted to terminate Nader’s employment on a without cause basis. UHN relied on the Agreement and continued Nader’s salary, benefits, car allowance, health and dental coverage, and vacation.
Nader argued that the Secondment was a separate fixed term employment agreement with no explicit termination clause and that in the absence of an early termination provision, he should be entitled to the balance of his wages under the Secondment.
UHN and Ontario Health maintained that the Secondment did not constitute an employment contract and that the Secondment explicitly confirmed that the Agreement continued to govern Nader’s employment. They submitted that if Nader could be both an indefinite employee with UHN and a fixed term employment with Ontario Health, he would be allowed to “double-dip”. Their arguments focused heavily on the provisions of the Secondment that Nader would remain an employee of UHN.
The court ultimately ruled in UHN and Ontario Health’s favor. By analyzing the “the intent of the parties and the scope of their understanding” the court determined that given the circumstances, the parties involved intended the Secondment to be a transitionary arrangement, and that the reasonable interpretation was that Nader always remained an employee of UHN and did not enter into an employment relationship with Ontario Health, fixed term or otherwise. The summary judgment application was dismissed.
Notes to Employers
It is important for employers to be clear with their intentions when employment arrangements are changed, whether it be on a permanent or temporary basis. Besides secondments, another relevant example in today’s workplace is working from home or hybrid arrangements. Papering these changes and having a written record are important, but it is also crucial to make sure some thought is given to the bigger picture. Employers should consider what are the consequence of certain changes or events, such as early termination, and are those changes or events clearly addressed in the agreement between the parties.