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Changing Terms of a Fixed-Term Employment Contract Without Employee Consent Proves Costly to Employer

I still meet HR professionals who believe that the employer can simply change employment contract terms unilaterally, without the employee’s agreement.  They cannot, as we have discussed here various times before (i.e. see here)

The latest case to reinterate this point is Loyst v.  Chatten’s Better Hearing Service, released last week by the Ontario Superior Court.

Basic Facts

In a small workplace, the relationship between the Owner and the Office Manager began to sour. The Owner informed the Office Manager that, moving forward, she would no longer be the Office Manager, and instead would be an accountant.  Moreover, she would no longer be entitled to attend business trips, which had been a standard perk for many years, and she would no longer be eligible for bonuses.  The Owner also said that he would not abide by an agreement to offer the employee a 15% share in the company after 5 years.

The Office Manager made it clear that she did not accept any of those changes.  The Owner responded by telling her to pack her stuff and leave, which she did.  The company asserted various positions in its defence to the lawsuit:  (1) that the employee quit; (2) that the employer had just cause due to the Office Managers’ poor management style; and (3) that information obtained after her termination about a conversation the Office Manager had with a client (complaining about the Owner) constituted just cause.

Issue: Was the Office Manager wrongfully dismissed?

Court’s Reasoning

The Employee was wrongfully dismissed.  She did not quit, because a quit must be “clear and unequivocal” and, “To be clear and unequivocal, the resignation must objectively reflect an intention to resign, or conduct evidencing such an intention”.  Here, there was no such clear intention to resign expressed in the facts.

This was a case, like the well-known decision in Wronko v. Western Inventory, in which the employer attempted to unilaterally amend fundamental terms of the employment contract and was met by a non-agreeable employee.  The Court of Appeal in Wronko made clear that an employer faced with a refusal by the employee to agree to an amendment of contract terms must either leave the contract untouched, or it must terminate the contract as a whole by giving the legally required amount of notice, and then renegotiate a new contract.  Here, the employer simply told the employee that if she doesn’t like the revised terms, she can leave.  That amounts to a fundamental breach of the employment contract, and a wrongful dismissal.

The Court allowed in the evidence about the alleged conversation between the employee and a client, even though the employer was not aware of this conversation at the time it dismissed the employee.  This is consistent with earlier rulings finding that employers can rely on new evidence obtained after the dismissal to argue just cause.  But here, the Court found that the conversation was just the normal grumblings of an employee and not grounds of dismissal without notice.

Remedy

Since the employee had  a 5 year employment term contract, she was entitled to all wages for the remainder of the 5 year period, which had about 30 months left on it, plus GST, from which was deducted monies she already received for termination pay and income she earned from other sources since her termination.  She was also entitled to receive the value of 15% of the company, which amounted to $180, 000.

Issue for Discussion

The Owner here claimed that the Office Manager’s attitude posed a threat to business relations and therefore that she should not be interacting with clients.  So he tried to introduce changes to keep her away from clients. This strategy did not work out very well for the employer.

Is there anything the Employer could have done differently to achieve its goal of keeping an employee away from clients when the employee would not agree to that arrangement?

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