As my contracts professor used to say, “you can’t suck and blow at the same time”. What he meant was that you cannot seek to enforce some parts of a contract while simultaneously breaching others. That is what happened to Rand A Technology Corporation in a recent case: they breached the termination clause in the employment contract by paying less than they were required to but, when the employee complained, they tried to rely on that same termination clause to limit their liability. They lost.
The pertinent facts of the case are not unusual. The Plaintiff was employed for approximately five and a half years, working as a Sales Representative at the time of dismissal. Her employment agreement contained a termination clause which provided that she could be dismissed without cause with two weeks’ notice or pay in lieu plus her minimum entitlements under the Employment Standards Act, 2000. When she was dismissed, the company delivered a termination letter which indicated that in order to receive the additional two weeks, the Plaintiff would have to
- execute a detailed three page Full and Final Release;
- return all company property without retention of copies;
- agree to continue to be bound by the Confidentiality and Non-Competition and Non-Solicitation provisions of the 2018 Employment Contract;
- agree to modify her LinkedIn profile; and
- agree that in the event of breach of any of these terms, she would re-pay the two weeks’ pay to Rand.
The Court took notice of the fact “Rand did not make these demands of Ms. Perretta on only one occasion, but twice. This removed the possibility that Rand’s initial demand for a Full and Final Release was the product of momentary inattention”.
As the Court found, the Senior HR Business Partner “received a letter from Ms. Perretta’s counsel and realized from it that he had made a mistake in demanding terms to the payment of two weeks’ pay in lieu of notice” and “then processed Ms. Perretta’s two weeks’ pay in time for the April 15, 2020 company payroll”. Furthermore, “Rand’s lawyer apologized, on Rand’s behalf, for demanding that Ms. Perretta execute a Full and Final Release.
The Court noted that
Rand’s breach was not “one act isolated from its surrounding circumstances”, as it contends, relying on Remedy Drug Store, at para. 46. It is a series of acts: the March 31, 2020 termination letter; the drafting of a detailed Full and Final Release with multi-faceted terms; the imposition of several additional entitlements in the proposed Enhanced Severance offer; and doing so not once but twice, by restating its demands in its letter of April 2, 2020.
Repudiation of the contract?
The Court summarized the law of repudiation:
Repudiation of a contract, whether an employment contract or otherwise, “occurs by the words or conduct of one party to a contract that show an intention not to be bound by the contract”.
The test is whether, considering surrounding circumstances, including the nature of the contract, the motives which prompted the purported breach, and the impact of the party’s conduct on the other party, a reasonable person would conclude that the breaching party no longer intends to be bound by the contract with the result that the innocent party would be deprived of substantially the whole benefit of the contract. A party can repudiate a contract without subjectively intending to do so, because the assessment is made objectively.
In assessing the facts of the case before it, the Court held that Rand’s conduct, although inadvertent, was sufficient to repudiate the contract:
I am satisfied that a reasonable person assessing the Defendant’s conduct would conclude that in demanding that its employee execute a Full and Final Release and comply with the terms of an “Enhanced Severance” offer as preconditions to receiving the two weeks’ pay to which the employee was contractually entitled, Rand no longer intended to be bound by the 2018 Employment Contract. I reach this conclusion accepting Rand’s admission that it made a mistake. Even if Rand’s mistake was innocent and resulted from a simple lack of understanding of the very employment contract that it had drawn, and even if I accept Rand’s evidence that it did not understand its obligations at law until so advised by counsel for its employee, that does not exhaust the analysis. My assessment is whether the Defendant’s conduct evidenced an intention not to be bound by the 2018 Employment Contract, assessed objectively. It does. (emphasis added)
The Court distinguished this case from others, such as Oudin v. Le Centre Francophone de Toronto, in which the employer had made errors in calculating the pay in lieu of notice.
Lastly, the Court noted that “…if the only consequence to Rand for its imposition of new demands at the time of termination that deprived its employee of the benefit of the contract is to apologize and pay the amount that it was lawfully required to pay, there would be little or no incentive to comply with its termination provision”.
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