Kelley Cho analyzes the decision of Sui v HungryPanda Tech Ltd, 2024 BCSC 1856, and the importance of clear employment agreements.
In the recently released BC Supreme Court decision of Sui v HungryPanda Tech Ltd., 2024 BCSC 1856 [Sui], the court highlighted the importance of pre-communication and fresh consideration in ensuring enforceability of subsequently provided employment agreements.
Background
In Sui, the employer, HungryPanda Tech Ltd. ("HungryPanda"), and the employee, Mr. Sui, exchanged emails concerning the potential employment of Mr. Sui as the general manager of Canada for HungryPanda. These emails consisted of an employment offer from HungryPanda outlining the salary, hours of work, length of probationary period, and stock options. The email stated, "After your confirmation, we will provide you with an official employment agreement for your signature". After some negotiation, Mr. Sui responded by accepting the offer. The day after the acceptance was communicated, HungryPanda sent Mr. Sui the employment agreement which, most importantly, contained a termination clause limiting the notice and severance entitlements to the Employment Standards Act and an entire agreement clause indicating any obligation in effect from any pre-existing employment agreement are no longer enforceable (the "Employment Agreement"). Both parties signed the Employment Agreement on that same day.
After 18 months of employment, Mr. Sui was terminated without cause.
Subsequently, Mr. Sui brought a claim against HungryPanda for wrongful dismissal, arguing that the Employment Agreement, and therefore the termination clause within it, is unenforceable because there was no fresh consideration provided for signing the Employment Agreement as a modification to an already-existing employment agreement, formed via the email exchanges.
Court's Decision
The court agreed with Mr. Sui and determined that the email exchanges contained all necessary elements to form an employment contract, and in the absence of any conditional language, a reasonable person would conclude that a contract was formed when the offer of employment was accepted by Mr. Sui and that the forthcoming "official employment agreement" would merely be a documentation of those terms.
Further, the court rejected the defendant's argument that the provision of an expense account, paid time off, and additional benefits in the Employment Agreement constituted fresh consideration, as these terms did not provide any "material advantage" to the employee. Firstly, the expense account and paid time off did not provide any more than the required statutory minimum. Secondly, although health benefits can constitute fresh consideration, in the current case, as the employee became entitled to the benefits immediately, not after a probationary period, there was no evidence to suggest that the employee would not have received these benefits if not for signing of the Employment Agreement.
In conclusion, the court determined that the Employment Agreement was unenforceable for a lack of fresh consideration. The court awarded the employee with 6 months of common law reasonable notice.
Takeaway
Sui alerts employers to be mindful of their communication prior to the signing of a formal employment agreement and the adequacy of fresh consideration, as it can make moot those carefully drafted employment agreements and put the employers at risk of unexpected, increased liability.
Therefore, as a general practice, if an offer is being discussed prior to the official employment contract being introduced, it is important to alert the employee that the offer is conditional upon signing an official agreement. Further, employers should ensure to provide the employment contracts to the employee for signing prior to the start of work. If neither has been done, and fresh consideration must be provided, employers should consider whether what they're suggesting is sufficient to constitute a "material advantage" to the employee.
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.
