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SPRING CLEANING: NOW IS THE TIME TO TIDY UP YOUR CONTRACTS AND POLICIES

The warm weather is here and spring cleaning has begun. While most people think of dusting shelves, removing clutter and vacuuming the rug, we here at CCP are focused on tidying up termination clauses and polishing employment policies and procedures! The latest reminder of the importance of annual reviews of these documents and processes comes from the Supreme Court of Canada, which recently tossed out an employer’s leave to appeal the New Brunswick Court of Appeal decision in Abrams v RTO Asset Management.

In Abrams the employer dismissed the employee from his position as Regional Manager. While the employer specifically noted the reason for the dismissal – entering into a romantic relationship with a subordinate – and that those facts supported dismissal for cause, the dismissal letter specifically terminated his employment without cause. The employer also offered the plaintiff a termination package, but reserved the right to take a for cause position at a later date. The employee rejected this offer and proceeded with a wrongful dismissal claim.

At the summary judgment motion, the employer took the position that it had terminated for cause and, alternatively, that the termination clause in the employment contract prevented the employee from claiming common law reasonable notice. The motion judge agreed with the employer and held that the dismissal had been for cause and was justified in the circumstances.

The New Brunswick Court of Appeal disagreed. According to the court, whether the facts of a case support a for cause dismissal and whether the dismissal was made for cause are two distinct inquiries. In this case, the dismissal letter, additional communications made to the employee around the time of dismissal, Record of Employment and the issuance of termination pay all supported the conclusion that the dismissal was made without cause. The Court commented on the employer’s attempt to reserve its right to forward a for cause position, writing:

[T]his caution, which was indisputably tactical and designed to exert pressure on the appellant to accept the Transition Package, did not accord with reality: the appellant had already been dismissed without cause before the caution was formulated.

Adding insult to injury, the Court also found the without cause termination provision in the employment contract invalid for purporting to contract out of the minimum standards required by New Brunswick’s Employment Standards Act. Specifically, the clause stated that the employer would not be required to make any payments following payment of notice or pay in lieu thereof. The Court found this a violation of the provisions of the Act which require payment of vacation and accrued wages following a dismissal. Yet another reminder that even one small invalid portion of a termination clause will render the entire provision void. In the end, the employee’s reasonable notice period was fixed at 24 months instead of the four weeks paid originally.

An annual review of your employment policies, procedures and processes can help to avoid situations like that in Abrams. The state of the law, particularly as it relates to termination clauses, is constantly in flux and committing to an annual cleanup is the best defence against costly litigation. Of particular concern this year, you should be asking:

• Do we have valid termination clauses? How long ago were they drafted?
• Do our contracts, policies and procedures reflect issues that have surfaced because of COVID-19, including temporary layoff and fringe benefit entitlements?
• Do we have template dismissal or other letters, and at what point in that process are we seeking legal advice?
• Do our policies and procedures reflect changes in legislation or are they flexible enough to adapt to future changes?
• How are we communicating employment decisions, and are they consistent with positions we may want to advance in litigation?

If you are looking for support with your human resources spring cleaning, the lawyers at CCPartners are available to assist you in preparing and updating employment agreements, policies and advising throughout the hiring and termination of employment. Click HERE to access CCPartners’ “Lawyers for Employers” podcasts on important workplace issues and developments in labour and employment law or contact any of our team members to answer you workplace questions.