One of the perceived benefits for employers of employment
agreements is that they can save on severance costs. Indeed, fixed
term employment agreements are often used to reduce, eliminate or
provide certainty about the requirement to pay severance upon
termination. However, as the recent decision of the Ontario
Superior Court of Justice in Roberts v ZoomerMedia Ltd.
2016 ONSC 2426 illustrates, the actual conduct of parties to
employment relationships will be crucial to determining legal
In 2007, Bill Roberts entered into an employment agreement with
his employer, Vision TV, for a fixed term ending on October 31,
2011. This agreement also provided that Roberts was to receive two
years' worth of salary at the end of the term of the contract,
as well as a $150,000 sabbatical payment should his employment be
extended beyond the end of the term. In 2009, the agreement was
amended, and Vision TV and Roberts agreed that he would be entitled
to a lump sum payment of two years's salary ($490,000) upon
termination or upon expiration of the term of the employment
Soon after the agreement was amended, Vision TV was acquired by
ZoomerMedia Inc. ("Zoomer"). As part of the purchase
agreement, Zoomer agreed to an assignment of the Roberts employment
agreement as amended. Roberts then proceeded to begin working for
Zoomer without any changes to his compensation.
Negotiations for an extension of the term of the employment
agreement then ensued. The parties were, however, unable to agree
to binding terms. Roberts worked past the October 31, 2011 contract
While negotiations continued, Zoomer argued that the Roberts
should not be entitled to benefits under the original employment
agreement. At this time, upset that his severance and other
contractual obligations were apparently being ignored, he
threatened legal proceedings on a claim of severance and the
In response, Zoomer encouraged further negotiations in lieu of
litigation, assuring the plaintiff of a deal that would include a
two-year severance payment. On March 1, 2012, Zoomer instead
terminated the plaintiff's employment without cause, and argued
that Robert should be entitled only to notice in accordance with
the common law for wrongful dismissal cases (which would have been
less than half of what was payable under the contract, and would
have been subject to mitigation).
At issue in this case was whether a common law employment
relationship negated the employment agreement, and in particular
the termination provisions. Zoomer claimed that the employment
agreement was null and void as the parties had not entered into a
new formal agreement at the end of the original term (October 31,
2011). Roberts countered that the amended employment agreement,
which had been assigned to Zoomer, provided that the two year lump
sum severance payment was due upon termination of employment and
not just expiry of the term.
In coming to a summary judgment decision awarding Roberts the
lump sum severance amount and the sabbatical payment as provided
for in the employment agreement, Justice Perell considered the
scope of negotiations and the inherent relationship of the parties.
As the employment agreement had not been discharged, the Court held
that Zoomer was bound to pay the amounts owing under the agreement
which Zoomer had assumed.
Takeaway for Employers
This decision confirms the importance of a careful review of
severance provisions in employment agreements. The Courts have in
recent years repeatedly stressed the importance that employers
"get it right" when attempting to limit amounts payable
to employees. For this reason, employers must be alive to contract
terms and entitlements provided therein, even in cases where there
is a possible argument that the employment contract is
extinguished. For those advising on employment issues in
transactions, this decision also provides caution about the
implications of simply assuming a contract as opposed to using the
opportunity to negotiate.
The foregoing provides only an overview and does not
constitute legal advice. Readers are cautioned against making any
decisions based on this material alone. Rather, specific legal
advice should be obtained.
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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