U.S. parents typically expect their Canadian subsidiaries to
follow their corporate policies. Unfortunately, the failure to
"Canadianize" the policies can lead to unintended
results, especially where the policies expressly state they do not
create a contract of employment.
The recent Canadian court decision in Oliver v. Sure Grip
Controls Inc. gives a stern reminder to U.S. parent companies
operating in Canada, that things can be different north of the
Unlike in the "at-will" states in the U.S., the
employment relationship in Canada is a contract and the terms of
that contract govern the rights of the parties. One of the
consequences of this difference is the need to implement policies
in a manner which complies with contract principles so that they
are enforceable. If the policies are introduced after the contract
of employment has been created, an employer may need to provide
"consideration" (value) to the employee to support their
enforceability. The court is not supposed to assess whether the
consideration is adequate; only whether it has been provided.
However, experience suggests the greater the value of the
consideration the less scrutiny it is likely to be put.
U.S. policies often expressly state that they do not create a
contract of employment and the employment remains "at
will". The use of a similar clause by one Canadian employer
meant it could not rely on the provisions in its policies which
sought to limit an employee's right to notice of termination or
pay in lieu thereof upon termination of his employment without
The Sure Grip decision examines this issue.
Oliver was a 9 year management employee of Sure Grip Controls Inc.
He had a written employment agreement but it did not deal with the
termination of his employment. Five years after he started, Sure
Grip introduced an employee handbook. At the time Oliver signed an
acknowledgement that he had received, read and agreed to comply
with it. The handbook addressed termination by suggesting Sure Grip
would pay only one week's pay for every full year of
employment. The handbook also stated, "I understand that the
Sure Grip Controls Inc Management Team Handbook is not a contract
of employment and should not be deemed as such."
In March 2011, in the context of a dispute over Oliver's
entitlement to a profit sharing payment (which had been denied
while Oliver was on medical leave due to a thyroid condition that
required surgery) the company terminated him. Sure Grip took
the position that Oliver's entitlement to pay in lieu of notice
of termination was limited by the handbook to nine weeks. However,
the trial judge found otherwise. She stated that while the parties
could have made rights on termination a part of their written
contract, the handbook clearly stated that it was not a contract of
employment. Consequently, Oliver's entitlement was not
limited to nine weeks' pay as suggested by the handbook.
Instead he was entitled to damages based upon the common law
principle of reasonable notice.
Oliver's damages were assessed at $87,684.00 based upon
twelve months' wages and commissions.
This case should be of interest to any employer wishing to rely
upon the terms of their policies. If the intention is to make the
terms part of the contract of employment, the employer must take
the steps necessary to ensure enforceability. Obtaining a signed
acknowledgment of the handbook and its enforceability is often not
enough. Even more importantly, a Canadian subsidiary adopting the
"no contract" language of its "at-will"
parent's policies will surely undermine the enforceability of
the very policies with which the parent expects the subsidiary to
comply. Alternatively, ensuring that the actual employment contract
contains the provisions required to limit company liability can be
a simpler and more reliable way to address these concerns.
Gowlings' team of employment and labour lawyers are
experienced in helping U.S. parents and Canadian subsidiaries
"Canadianize" their policies to ensure compliance and
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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