The employee in that case was hired as a senior executive
for a two-year term and his contract was subsequently renewed for
an additional year. His second fixed-term contract included a
clause requiring that he receive a 12-month severance payment in
the event of early termination. A month before his contract was due
to end the employee was informed that it would be not renewed. The
employee was also informed that he would not need to come back to
work for his final month. Instead, he was told to make arrangements
to pick up his personal effects from the office and that the
President and CEO would be taking over his duties.
The employee sued, alleging he was terminated before the end of
his contract without cause. At trial, he was awarded 12 months'
severance as was required by his contract of employment.
In upholding the Trial Court's decision, the Alberta Court
of Appeal held that the employer's conduct amounted to
constructive dismissal. The Court noted that the employee was not
simply informed that his contract would not be renewed; rather, he
was also informed that he no longer needed to attend work and that
his duties would be taken over by someone else. The Court concluded
that a person in the position of the employee acting reasonably
would have considered themselves to have been constructively
dismissed. The Court held that a contract of employment, whether
for a fixed or indefinite term, is a mutual contract. As such, the
Court held that a unilateral change to the contract must be
consented to by both parties. In this case. The employee did not
consent to the unilateral change in his employment circumstances.
The Court also upheld the award of 12 months' severance,
finding that that, while the ordinary practice for the early
termination of a fixed-term employment contract is to pay out the
contract if it had run to its end, in this case the parties had
contracted a specific payment for early termination. The Court
therefore applied the contract's termination provisions.
As this decision found, where fixed term contracts are in place,
early termination can nevertheless result in constructive
dismissal. Where termination provisions are in place they may be
triggered by such decisions. Clear wording in the agreement would
be beneficial to avoid inadvertent triggering of termination notice
that well exceeds the expiry of a fixed term contract.
As well, planning the manner and timing of termination is
necessary where fixed term agreements are involved to avoid
unexpected outcomes as occurred in this case.
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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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