A Cautionary Case Against Two-Step Employment Offers

Sui v. HungryPanda Tech Ltd., 2024 BCSC 1856 serves as a warning to employers who make initial employment offers before issuing formal contracts.

In that case, the B.C. Supreme Court held that a written employment contract containing new restrictive terms was unenforceable due to a lack of fresh consideration.

Facts

Before hiring Xing (Vincent) Sui, HungryPanda Tech Ltd. exchanged e-mails with him about the terms of his employment. It sent Mr. Sui an offer outlining key terms, including job title, place of employment, start date, salary, days of work, stock entitlements and probationary period. One of its e-mails stated, "After your confirmation, we will provide you with an official employment agreement for your signature."

The parties continued negotiating by e-mail and Mr. Sui eventually accepted the offer.

HungryPanda then sent Mr. Sui an employment agreement (the "Employment Agreement") containing additional terms not previously discussed, including a termination clause and a provision stating the Employment Agreement was the "entire agreement" between the parties. Both parties signed the Employment Agreement that day.

Approximately 18 months later, HungryPanda dismissed Mr. Sui from employment without cause and attempted to rely on the termination clause in the Employment Agreement to limit his entitlement to termination notice or pay in lieu of notice.

Positions

Mr. Sui argued that a binding contract was formed through the e-mail exchange and the Employment Agreement was unenforceable because it lacked fresh consideration — a new benefit in exchange for the added terms.

HungryPanda claimed that the e-mail exchange did not form a binding contract because it was conveyed to Mr. Sui that he would still have to execute a full employment contract. It also argued it had provided fresh consideration in the form of group health benefits, an expense account and paid time off.

Decision

Contract Formation

The Court found that the e-mail exchange contained all of the elements necessary to form a binding contract.

The Court noted there was only one condition stated in the e-mail exchange: Mr. Sui's proof of eligibility to work in Canada. That specific statement strongly suggested there was no other condition attached to the employment offer.

The Court also found that any employment term absent from the e-mail exchange could be addressed through statutory minimums or by implying reasonable notice of termination under the common law.

A reasonable person would conclude, the Court held, that a contract was formed through the e-mail exchange and any "official employment agreement" which followed would merely document the agreed terms of employment.

Fresh Consideration

The Court determined that the Employment Agreement contained several new terms that were less favourable to Mr. Sui and fresh consideration was therefore required.

The Court stated that fresh consideration had to be of some "material advantage" to the employee to be adequate under the law.

It went on to find that HungryPanda failed to establish adequate consideration was provided in exchange for the new restrictive terms:

• The Employment Agreement stipulated that Mr. Sui would receive "those additional benefits" set out in the employee manual. However, there was no mention of such benefits in the manual.
• There was nothing in the e-mail exchange to suggest that Mr. Sui was precluded from receiving health benefits or an expense account. Those items would likely have been available to him irrespective of whether he signed the Employment Agreement.
• The terms around paid time off provided no more than what was already required by law.

The Court ruled the Employment Agreement unenforceable for lack of consideration and awarded Mr. Sui damages equal to six months of termination pay in lieu of notice — his common law entitlement.

Takeaways:

• The safest practice is to avoid two-step employment offers.
• If an employer plans to issue a formal contract after the initial employment offer, the offer should include language which makes it clear that the offer is conditional upon the signing of a formal written contract.
• Any new contract terms that limit employee rights must come with fresh consideration — a tangible, material benefit and not just what is already owed by law or under company policy.
• An "entire agreement" provision cannot save a contract that lacks fresh consideration.

Previously printed in the LexisNexis Labour Notes Newsletter.

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