Since Bhasin v Hrynew, 2014 SCC
71, courts have been applying the "organizing principle"
of good faith in all contractual relationships thereby
delinating its scope in different circumtances. One recent decision
applying this principle addressess the circumstances where an
employer excercises a discretionary contractual right to
effectively deny an employee his compensation under a benefits
In Styles v Alberta Investment Management
Corporation, 2015 ABQB 621, the Plaintiff employee
received a offer of employment where (i) the Defendant employer
could terminate the employee without cause and (ii) the employee
would be entitlted to participate in a long term incentive plan
(the "LTIP") i.e., performance based compensation. For
unknown reasons, the employer choose to excercise it's
discretionary authority to terminate the employee without cause but
refused to make payment to the employee under the LTIP, on the
grounds that the employee was terminated before the maturity date,
a violation of a condition precedent and/or act constituting
forfeiture of the LTIP bonus.
The Alberta Court of Queen's Bench held that while the
employer had the right to terminate the employee without cause, it
could not do so in a manner that unfairly undermines the legitimate
contractual interests of the employee (para 71):
[...] [I]t is reasonable to recognize as a manifestation of the
general organizing principle of good faith, a common law duty which
requires that discretionary powers granted under a contract must be
exercised fairly and reasonably and not in a manner that is
"capricious" or "arbitrary" (para 63).
In holding that it was unfair for the employer to receive the
benefit of the employee's hard work and then refuse him
compensantion through the exercise of its discretionary power, the
court determined it was "reasonable for the employee to have
assumed that as long as it performed, he would be compensated as
promised, and that the employer would not act in an arbitrary
manner to unfairly take away that compensation" (para 117).
The court concluded that the employer's exercise of its
discretionary power was unfair, unreasonable and arbitrary and
awarded damages to the employee.
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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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