Law Firms Should Think Twice Before Withdrawing Articling Offers

The COVID-19 pandemic has forced many Ontario businesses to slow down or halt operations entirely. The impact of this economic downturn has affected virtually every industry in the province.

Most recently, some legal employers have rescinded articling contracts for recent law school graduates (articling is a mandatory 10-month paid internship prior to becoming a lawyer). Law firms and other legal employers should be very careful about rescinding previously accepted articling contracts as law students may be able to advance a claim for liquidated damages arising out of their unilaterally cancelled employment contracts.

This blog post is specifically tailored for graduating law school students entering articling agreements and legal employers. For information about summer positions for students, please see our article on the Impact of the COVID-19 Pandemic on Summer Internships.

Articling Contracts Could Well be Fixed-Term Contracts

Articling students are required to complete a 10-month term and this length of time is strictly regulated by the Law Society of Ontario. Thus, most articling contracts are very likely either implied or explicitly 10-month fixed-term contracts.

In Ontario, where a fixed-term contract is terminated early, the employee will be very likely to be entitled to the balance of the fixed-term. This principle was established in Howard v Benson Group Inc. (The Benson Group Inc.), 2016 ONCA 256. In this case, the court held that the employee and employer had agreed upon a fixed-term and in light of an ambiguous early termination clause, the employee was entitled to the remainder of that term.

There is no basic right for an employer to cancel, delay, or otherwise alter an employment contract after acceptance but before the start of the contract. Any such action might well be a breach of contract.

No Duty to Mitigate

If the contract is found to be a fixed-term contract then case law holds that damages resulting from a terminated fixed-term employment agreement are liquidated damages and not “notice” damages. As the damages are liquidated, they are not subject to the duty to mitigate and any money earned by the employee in the same time frame is not deductible from the total amount of damages. In the context of an Articling student, the student could find an articling contract elsewhere and the money they earn there will not be deducted from their claim against the employer that previously revoked their articling contract.

No Requirement for Employment to Commence

Canadian courts have awarded employees damages arising from the cancellation of an accepted offer of employment prior to the start date. In Buchanan v. Introjunction Ltd., 2017 BCSC 1002, the plaintiff’s employer notified him that they would be cancelling his executed employment contract prior to the start date of his employment. This case stands for the principle that employers can owe damages pursuant to a cancelled employment contract, despite the fact that employment has not commenced.

Options for Law Students

On Wednesday, April 22, 2020, the Prime Minister announced a new benefit program. The Canada Emergency Student Benefit (CESB) will be available to students who are currently enrolled in college or university, plan to begin in September or have graduated in December 2019. The CESB will provide students, including those earning less than $1000 each month, with $1,250 per month from May to August 2020. Students who provide care for dependent family members or who have a disability can qualify for up to $2,000 in benefits. The current materials only refer to post-secondary students with no restrictions on age or program and may be accessible to law students.

On the same day, the Prime Minister also announced a new program called the Canada Student Service Grant which provides between $1,000 and $5,000 of benefits to student volunteers who are working in programs related to COVID-19. The details of both new student emergency relief programs will be expected in the upcoming weeks.

May 4, 2020 Update: On May 1, 2020, Bill C-15 received royal assent and the Canada Emergency Student Benefit Act was enacted. The law received some changes as a result of parliamentary debate. The amount of the benefits available to students who provide care for dependents or have a disability has been increased to $2,000, bringing it in line with the Canada Emergency Response Benefit. Additionally, every applicant will be directed to a government administered job bank in order to keep students connected to the labour market. The legislation defines a Student as any citizen or permanent resident who is enrolled in a post-secondary program that leads to a degree, diploma or certificate. The definition also includes students who have graduated from secondary school in 2020 and have applied for enrolment in a post-secondary program that is scheduled to begin before February 1, 2021. This definition does not include age restrictions.

May 13, 2020 Update: Further details of the CESB program have been announced. Students will be able to register on the Canada Revenue Agency or over the phone at 1-800-959-2019 or 1-800-959-2041. Eligible students will need to reapply for each four-week period. Eligible students include those who are in both part-time, full-time and summer programs. Canadians who are actively enrolled in apprenticeship programs and meet the requirements will also qualify. Any money earned from scholarships, student grants and loans, bursaries or graduate stipends will not count towards the $1000 monthly income limit required to qualify for this benefit.

Options for Legal Employers

In response to the COVID-19 pandemic, the Canadian government has created a Federal Wage Subsidy program to assist employers during the economic uncertainty caused by the virus. Employers that provide articling contracts for law students may have the option to rely on the Federal Wage Subsidy program to continue previously accepted articling contracts. This could be a viable method for employers to receive assistance with articling student wages and prevent any claims arising out of cancelled articling contracts.

The Federal Wage Subsidy program assists employers with employee wages. In its current form, it extends wage assistance up to June 6, 2020. Based on the definition of eligible employee included in the government’s materials, an Articling Student may qualify for this coverage.

On the basis of these principles, employers should be careful about revoking an executed contract of employment. Articling students may still have avenues by which they can receive the liquidated value of their employment contract even if the contract is cancelled prior to the start date of the employment.

*On April 23, 2020, the Law Society of Ontario announced that required term for an articling student has been reduced from 10 months to 8 months for students in the 2020-2021 cycle.

This article was written by Walter Yoo, employment lawyer at Monkhouse Law.

Legal employers and articling students who find themselves in this situation should speak with a lawyer from Monkhouse Law to seek advice on how to navigate this particular employment relationship in light of the outbreak of COVID-19 in Ontario.

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