Small changes to complicated employment contracts…

... can have a big impact.

Employment contracts can be long, complicated documents which may confuse many employees. What you see isn't necessarily what you get. Actions involving dismissal and breach of employment contract require a careful examination of not only the language in the employment contract, but the intention behind those words. The exact meaning of the terms of a contract may not be known until a judge has analyzed them, considered the surrounding circumstances of the employment, and rendered a decision.

Renewing an employment contract - be wary of small changes

Consider the case of an employee, the CEO of a BC mining company, who was presented with a new employment contract by the company's Board of Directors.  Less than a year after signing this, the employee suddenly found himself seemingly without a position. A concerned shareholder within the company had spearheaded a proxy vote and become Chairman of a newly elected Board of Directors. The Chairman’s campaign hinged on his accusation that the CEO was overpaid, dishonest, and incompetent. While he was never officially fired, the employee’s position as CEO was eventually taken over by the Chairman. The employee was asked to return his keys and take some time off. He was still being paid a salary when he filed for damages for dismissal without notice.

Board of Directors vs. Employee: who is in breach of contract?

With the hostility of an entire Board of Directors pointing in his direction, the employee believed that his time with the company was over. Even if a new position was offered to him, he couldn't trust that they would treat him fairly. He argued that even if they didn't say he was fired, the Board's actions pointed to dismissal or constructive dismissal. He believed their “investigation” was a ploy to buy time and find a reason to not pay him 18 months’ reasonable notice according to the termination clause in his employment contract.

The Board claimed that the employee was never dismissed but merely suspended with pay, pending investigation. They didn't intend to terminate his position and they required his assistance to ensure a smooth transition for the new Board members. They claimed that he had repudiated the employment contract by taking legal action while he was still employed, and therefore wasn’t entitled to any notice.

The Court rejects phrases in the employment contract

The Court determined that the employee had indeed been dismissed or constructively dismissed by the Board. The Board was in breach and liable for damages. Careful examination of the employment contract revealed the addition of two small phrases to the new agreement. The employee noticed these additions weren’t on his previous two contracts, but didn't think they were a concern. The additional phrases were added to give the Board the option to only pay five weeks’ notice instead of 18 months in the event of a termination.

The Court found that the phrasing was logistically inconsistent, superfluous and therefore, irreconcilable. It just didn’t make any sense whatsoever, and the Court rejected the phrase from the clause completely. A fortunate turn of events for the employee, who was awarded his full 18 months’ notice.

While it’s recommended that employees seek legal advice before signing on the dotted line, it is equally important that employers understand the terms and implications of the employment contracts they present to their employees. Misinterpretation of an agreement can be a costly mistake on either side.



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