Void Termination Clause Does Not Void Fixed Term Contract.

In Kopyl v Losani Homes (1998) ( no CANLII Cite yet) Justice Harper had to decide whether a fixed term contract with an illegal early termination clause also voided the fixed term aspect of the agreement .

If the answer was YES, then the damages would be based on reasonable notice.

If the answer was NO, then the Plaintiff would be entitled to the balance of the term without any duty to mitigate nor any accounting for actual mitigation earnings.

The Court decided NO. This is what the Court said :

[15]There is nothing illegal in setting out the term limit of an employment contract. Fixed term contracts do not offend any provision of the ESA, nor do they restrict any common law rights of an employee. There is not mischief to be protected against in such circumstances.

[16]In my view, if the separate and distinct termination clauses are void, that does not void the whole contract and that includes the time limitation set out in a fixed contract.

My Commentary:

Many previous cases have said that if any component of a termination provision is void then the whole provision is void even if the other parts do not offend the ESA. If that is so, then why is a fixed term not part of the overall termination package and therefore should also be void?

This ruling can either help or hurt Plaintiffs, depending on when the termination takes place.

Scenario 1: Plaintiff has a 24 month fixed term with an illegal 30 day termination clause and is fired in month 6 . Result? Plaintiff gets 18 months of damages with no duty to mitigate .

Scenario 2: Plaintiff has a 24 month fixed term with an illegal 30 day termination clause and is fired in month 23.5. Result : Plaintiff gets 2 weeks of damages.

The argument in favour of this interpretation is that each plaintiff got what they bargained for, namely 2 years of pay .

Given the huge risks that face employers on fixed term contracts, one wonders why employers ever use them. They would uniformly be better off if they had a contract with an indefinite term with a fair and enforceable termination clause.

If you would like a copy of this case, email me at barry@barryfisher.ca

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Failure to Accept Offer of Reemployment By Acquiring Company Before Termination is Not a Failure to Mitigate:

In Giduturi v LG Electronics Canada (no CANLI citation yet) Justice Dinnen had a situation of a 49 year old  warehouse worker of 13 years service whose employer   (  LG ) announced that it ws  outsourcing its warehousing operation in 8 weeks time  to a third party company ( Pantos) who would be offering employment on the same terms and would respect their LG seniority.

However Pantos did not do so in that they offered inferior compensation and purported to say that the employment was ” at will” .

The Plaintiff refused the Pantos offer. Pantos then filled the job. Only after the Plaintiff’s refusal did LG terminate the Plaintiff. 

The Court found that the Plaintiff’s failure to accept the Pantos offer was not a failure to mitigate for two reasons:

  1. It was not comparable in terms of the compensation.
  2. Citing the Court of Appeal in Dussault v. Imperial Oil Limited 2018 ONSC 1168. where it held “ it is fatal to an employer’s argument that an employee failed to mitigate his damages by working for his old employer where the offer of alternative employment was made before the termination: “

The Plaintiff was awarded 12 months notice.

My Comments:

In many situations where a company is sold, it is common for the purchasing  employer to offer employment to the employees of the seller before closing and before the seller gives notice of termination. The seller does not wish to give notice of termination as this may trigger the obligation to pay ESA termination and severance pay. If the purchaser does employ the employee then the seller is likely off the hook for any termination obligations.

One  way to avoid this situation is for the purchaser to agree that it will keep all its offers of employment open for acceptance to some point after the closing of the transaction. However the purchaser may be unwilling to do so because this would likely create an unacceptable level of uncertainty in so far as staffing is concerned.

If you would like a copy of  this case, email me at barry@barryfisher.ca

For my mediation availability, go to www.barryfisher.ca

Why Claim a Breach of Fiduciary Duty When a Breach of Confidentiality Already Exists ?

In England Securities Ltd. v. Ulmer, 2023 BCCA 241 (CanLII) Mr Ulmer worked for England as an Investor Relations Manager. In this role he had access to an extensive list of his employers clients, namely people who invested in their property syndication arrangement .

As England decided to wind down his company, Ulmer worked at another similar company called Churchill. This was done with England’s consent.

Churchill wanted access to England’s investor list but the parties failed to come to a deal. Ulmer however delivered to Churchill a complete list of England’s investors. Ulmer claimed he thought that the parties had reached a deal but apparently never confirmed that with England.

England then sued Ulmer for breach of fiduciary duty which both the trial judge and the Court of Appeal found to be not viable because Ulmer was not a fiduciary. England lost the case.

My thought is however is why didn’t England also just plead a breach of the duty of confidentiality? This duty is an implied term of all employment agreements, no matter the status of the employee. Moreover, this duty survives beyond the term of the employment.

The measure of damages would be similar. In this case there was clearly a value to the investor list as there was a very interested potential purchaser.

Sometimes the easy argument is the better argument .

If you like a copy of this case, email me at barry@barryfisher.ca

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