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Danger of fixed term contract avoided

The recent decision in Tossonian v. Cynphany Diamonds Inc. 2014 ONSC 7484 highlights the importance for both employees and employers to clearly specify the fundamental terms of an employment contract in writing including the “term” of the contract. In this case, Mr. Tossanian alleged that he had been lured to relocate from Vancouver to Toronto partly on the basis of a guaranteed five year fixed term contract and he had been dismissed only eight months into the term. Mr. Tossanian was seeking damages equivalent to four years and four months of salary that was significant for such a short service employee and highlights the dangers of terminating fixed term contracts early. Cynphany Diamonds Inc. (“Cynphany”) defended itself on the basis that there was no fixed term contract and Mr. Tossanian had resigned from his position.

The court commenced its analysis by noting that Mr. Tossanian had been residing in Vancouver and had met the Owner of Cynphany on a trip to Toronto. The two were both Armenian and were both involved in the jewelry business. The Owner of Cyphany ultimately “verbally” proposed the terms of a job which included salary, cash bonus, commission and a one-time moving expense. The parties disagreed on whether a five year fixed term was ever part of this “oral discussion”.

Prior to Mr. Tossanian moving to Toronto, the Owner sent him an email summarizing the terms of the agreement. This email did not make any reference to a “five year fixed term”. Mr. Tossanian was asked under cross examination why he had never sought the inclusion of a reference to the five year fixed term or the amendment of this e-mail. Mr. Tossanian responded that he “trusted” the Owner to do right by him. Mr. Tossanian accepted this email, moved to Toronto and started to work for the business.

After he started working in Toronto, the Owner created a document for payroll that summarized the terms of employment and did not reference a five year fixed term. However, Mr. Tossanian created two documents for the purposes of securing a mortgage which did reference a five year fixed term and were both signed by the Owner.

Eight months into his employment the Owner discovered that Mr. Tossanian had been looking to accept a job at his direct competitor. The Owner confronted Mr. Tossanian and Mr. Tossanian alleged he was terminated. The Owner maintained he resigned.

The Court focused on the e-mail that the Owner had sent to Mr. Tossanian with the terms of employment and the failure of Mr. Tossanian to ever seek to have this email amended in writing to reflect the new term as fatal to his argument that there was a clear five year fixed term. Moreover, given he relocated after and commenced his duties suggested to the court that he had accepted the terms as outlined in the email which did not include a five year fixed term.

The Court then concluded that Mr. Tossanian was terminated by the owner for looking for a new job. However, he was not entitled to the balance of a five year fixed term contract because no such agreement existed. Rather, the Court awarded him two months of common law pay in lieu of notice.

Consequently, this case highlights the need for both parties to an employment contract to reduce essential terms to writing and to make sure the terms accurately reflect the deal. Further, any mistakes should be cleared up by written revisions/amendments to the agreement and parties should not rely on oral evidence that cannot be substantiated. Finally, employers should be aware of the significance of early termination of fixed term contracts and the need to consider inserting termination clauses that address what happens, how much is paid and the duty to mitigate if the fixed term is terminated.

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Simon Heath

Employment Lawyer and principal at Heath Law, Employment Lawyers
Simon Heath, BA, MIR, LLB, is the Principal of Heath Law, Employment Lawyers in Mississauga, Ontario. Simon represents both public and private-sector employers and employees (unionized and non-unionized) at all stages of the employment relationship with a focus in the areas of employment law, labour law and human rights law; these representations are made at all levels of courts and all administrative tribunals. Read more
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