A recent decision from the Court of Appeal for BC has exhibited
some rarely seen leniency towards employers when drafting
termination agreements. The case,
Hall v. Quicksilver Resources Canada Inc., involved the sale of
a decommissioned pulp mill, a successor employer, and the intention
of a termination agreement.
In the fall of 2012 Mr. Hall was informed by his employer of
nearly 25 years, Catalyst Paper Corp. ("Catalyst"), that
the Elk Falls pulp mill was being sold. Mr. Hall had worked as the
Facilities Manager and was the only employee since a 2011
decommissioning. The mill was being sold to Quicksilver Resources
Canada Inc. ("Quicksilver") to be used as a Liquefied
Natural Gas Plant. Along with the purchase of the site, Quicksilver
expressed an interest in retaining the services of Mr. Hall. The
potential sale of the site spurred conversations between Mr. Hall
and Catalyst related to his continued employment or payment for his
extensive tenure. Mr. Hall and Catalyst discussed the terms of this
payment through email and various draft agreements. Eventually the
two parties agreed on a 14-month lump sum payment so long as Mr.
Hall signed a release barring any future claims related to his
employment with Catalyst.
Following the close of the agreement and the sale of the site,
Mr. Hall accepted employment with Quicksilver in May of 2013. Mr.
Hall was then dismissed without cause in February 2014. Following
his dismissal, Mr. Hall brought an action against Quicksilver for
wrongful dismissal. At trial, the judge determined that the payment
pursuant to the agreement between Catalyst and Mr. Hall was not
termination pay but, rather, a retention bonus. Therefore, the
trial judge determined that Quicksilver inherited the length of
service from Catalyst and damages for wrongful dismissal should be
based on 24-25 years of service rather than the 8.5 months spent
with Quicksilver. The trial judge awarded Mr. Hall 18 months of
salary minus mitigation efforts during that period. In the
alternative, the trial judge stated that if the length of service
was 8.5 months Mr. Hall should be awarded 7 months common law
reasonable notice on account of his very specialized managerial
Quicksilver appealed the ruling on various grounds including the
finding that Mr. Hall's employment was continuous from his time
with Catalyst and that his circumstances attracted a longer than
typical reasonable notice period.
The appeal focused on the agreement between Mr. Hall and
Catalyst, and whether the payment compensated him for his
dismissal. On this issue the BC Court of Appeal disagreed with the
trial judge. A unanimous BC Court of Appeal found that the
parties' negotiations prior to finalizing the agreement and
communications subsequent to signing the agreement helped
characterize the nature of the agreement. On numerous occasions Mr.
Hall referred to the agreement as a "termination
agreement" or severance and the terms of the agreement made it
very clear that the primary purpose of the document was one of
termination. In particular, if the payment was strictly a retention
bonus there would be no need for a mitigation clause. The agreement
did not require that Mr. Hall continued to work for Quicksilver
once the sale was complete. Lastly, the Court found that Catalyst
acquiescing to the deletion of the word "severance" in
favour of the word "payment" (a request by Mr. Hall for
tax purposes) did not change the intention of the agreement.
The BC Court of Appeal allowed the appeal in favour of
Quicksilver and reduced the award to three months of reasonable
notice based on Mr. Hall's 8.5 months of service, age of 42
years, and holding a managerial type position.
Typically when wrongful dismissal cases turn on the
interpretation of a contract, employers find themselves under a
microscope; the slightest misstep or ambiguity will be read in
favour of an employee. This decision is a breath of fresh air for
employers; the BC Court of Appeal took a common sense look at the
agreement and the factual underpinnings to its creation.
If your organization is faced with terminating an employee
without an employment contract, the
lawyers at CCPartners have the experience to assess your
liability and draft an agreement to avoid costly litigation.
CCPartners also assists vendors and purchasers in sale
negotiations to draft contract terms to protect parties against
costly employee severance obligations that can be triggered in the
sale of a business.
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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