The BC Supreme Court recently determined that an email sent to a prospective employee detailing partial employment terms prior to a formal agreement constituted a full and binding employment contract.
Facts
The employer sent a prospective employee a 60-page detailed offer of employment via email (the "Email Agreement"). The Email Agreement contained information about the employee's compensation, bonuses, benefits and leave entitlements. It did not, however, contain termination or non-competition terms. The Email Agreement indicated that the employer would provide the official employment contract upon receipt of the employee's full legal name and desired start date.
Upon the employee's acceptance of the Email Agreement, the employer sent a formal written employment contract (the "Letter Agreement"). The Letter Agreement included termination and non-competition clauses among other burdens and limitations on the employee, none of which had been included Email Agreement. It did not contain the information about employee entitlements and benefits outlined in the Email Agreement. The employee signed the Letter Agreement and commenced work on September 20, 2021.
On May 23, 2023, the employer terminated the employee, relying on the termination clause in the Letter Agreement.
Issue
Was the Letter Agreement an enforceable contract? Or did the Email Agreement constitute a complete and binding employment contract, such that the employer could not rely on the termination clause and notice entitlements in the Letter Agreement?
Decision
The court held that the Email Agreement constituted a complete and binding employment contract between the employee and employer. The Letter Agreement was unenforceable, as no new consideration was presented to the employee along with its terms. Thus, the employer could not rely on the termination provision in the Letter Agreement, and the employee was entitled to five months pay in lieu of notice under the common law.
Reasoning
The Email Agreement contained a full offer of employment with detailed and lengthy terms. The employee accepted the offer when she provided her name and start date. The subsequent Letter Agreement imposed new terms to the existing agreement with no new benefits or entitlements to the employee. To enforce the new terms in the Letter Agreement, the employer would have had to provide additional consideration or benefit to the employee. The promise of continued employment in exchange of acceptance of new terms does not constitute consideration. The court noted that adequate consideration is especially important where new terms impose onerous burdens and detriments on the employee.
Takeaways for Employers
Provide a single, formal and comprehensive offer of employment with consideration
This decision serves as a reminder to employers to provide prospective employees with a single, formal and comprehensive offer of employment that incorporates all relevant terms and conditions. Employers should avoid sending initial offers with partial terms prior to the formal agreement, as these communications could be enforced as a complete and binding contract, rendering the formal agreement unenforceable. Employers should be especially careful not to introduce new terms or obligations to employees without providing new benefits or consideration.
Failure to provide consideration for new employment terms could result in high awards for short service employees
Employers should be aware that, should their formal agreement be rendered unenforceable, they may lose important protections related to termination. In this case, the employee worked for the employer for approximately one year and eight months. Because there was no termination clause in the Email Agreement, the BC Supreme Court awarded her five months pay in lieu of reasonable notice under the common law. After deducting mitigation earnings and the amount already received, the total award was $31,647.44. If, the employer had successfully relied on the Letter Agreement's termination clause, the employee's compensation would have been $5769.23 for three weeks pay in lieu of notice. If, for example, the employer had successfully relied on a termination clause limiting their liability to the requirements in the BC Employment Standards Act, RSBC 1996, c 113, the employee's compensation would have been two weeks pay in lieu of notice.
The BC Supreme Court will not award costs to a party who's claim reasonably should have been brought in Small Claim Court.
The final award was within the monetary jurisdiction of the Small Claims Court. The BC Supreme Court held that the employee was not entitled to costs of her action, except for her reasonable disbursements. This was because there was no sufficient reason to bring the claim in in the Supreme Court, as even the highest potential award to the employee was still less than $5,000 over the monetary jurisdiction of the Small Claims Court.
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