A. INTRODUCTION
The recent Ontario Superior Court of Justice decision in Bernier
v. Nygard International Partnership (“Bernier”) highlights the importance of properly drafted written
employment contracts. As will be discussed in this Bulletin, the results of
this decision show why employers, including charities and not-for-profits,
should have employment contracts reviewed, both to ensure the contracts are
compliant with the law, and to protect employers from unexpected liabilities in
the event of employee terminations.
B. THE FACTS
Diane Bernier, the plaintiff, was fifty four years of age
and had worked for Nygard International Partnership (“Nygard”), the defendant,
for thirteen years before she was terminated without cause on December 4, 2012.
Ms. Bernier was a managerial employee, and while holding this position, she had
earned a base salary, annual bonus, car allowance, health and dental benefits,
and employer contributions to disability and life insurance coverage. In the
last four years of her employment before she was terminated, she had earned a substantial
compensation package in excess of $190,000 annually.
When Nygard terminated Ms. Bernier on December 4th 2012, she
received base pay and benefits for 21.3 weeks until April 30, 2013. She later
received her bonus for the year 2012 of $45,840. Nygard’s payments were based
on its calculation of the minimum pay in lieu of notice and severance pay
standards as prescribed in the Employment Standards Act, 2000 (“ESA”).
Unwilling to accept that amount, the plaintiff claimed that she was entitled to
a significantly higher amount of compensation in accordance with her legal
rights at common law. Ms. Bernier sued Nygard and filed for summary judgment in order to receive the compensation she believed was owed. In response, Nygard
argued that the plaintiff had received the proper compensation and that a full
trial was required to debate the issue further.
C. THE LEGAL ISSUES AND THE DECISION
Nygard took the position that there were issues to be
tried, objected to the plaintiff’s request for summary judgment and raised four
questions:
1) Was the plaintiff’s
common law entitlement to reasonable notice modified by a contract?
2) Did the
employer’s general policy about limited termination notice periods displace
reasonable notice at common law?
3) Should the
reasonable notice period compensation include bonuses, in addition to base pay
and benefits?
4) Did the plaintiff reasonably mitigate
her losses by searching for new employment?
First, the court analyzed the question as to the
employment contract potentially limiting the common law reasonable termination
period. The plaintiff had signed a written employment contract in 1999 prior to
commencing her employment. This contract provided a thirty day termination
notice period. Given her years of service, this thirty day notice period was
less than the statutory requirement, and therefore was void and unenforceable. Nygard
did not dispute that the termination clause was void.
However, Nygard also claimed that a subsequent agreement
regarding termination rights had been made in February 2007, at a meeting with
the plaintiff and Nygard’s corporate president. Nygard asserted that the plaintiff
had accepted an increase in salary and bonus, and in return had agreed to amend
the notice provisions in her contract to provide that upon termination she would
be provided the minimum notice and statutory payments required by the ESA.
Nygard submitted the February letter as evidence, but it was not counter-signed
by the plaintiff, and Nygard did not submit an affidavit from the corporate
president confirming the February agreement.
The plaintiff asserted that she did not attend such a
meeting nor did she ever receive the February 2007 letter. Although Nygard
argued that a trial was necessary to determine whether the agreement had been
amended in 2007, the court rejected this submission. The court stated that
there was no evidence of such an agreement. It further stated that there was a
negative inference drawn from the corporate president’s lack of evidence, and
the letter was simply “uninformed speculation.” The court concluded that the
plaintiff’s sworn evidence about there being no 2007 agreement prevailed over
the defendant’s lack of evidence. As a result, the court ruled that there was
no amendment to the employment agreement in 2007, and therefore the plaintiff
was entitled to the common law reasonable notice period, as the thirty day
termination clause in the 1999 contract was unenforceable.
The court then analyzed the issue as to whether a general corporate
policy on termination notice could displace the common law notice period. Nygard
contended that it had a general policy that limited the notice period to the
statutory minimum, and the initial agreement and the alleged 2007 agreement
both revealed this policy. Nygard also claimed that the plaintiff was fully
aware of this general policy. In response, the plaintiff asserted that she had
not been aware that this type of policy applied to her managerial position, nor
had she ever signed a letter or other document assenting to the policy terms. Agreeing
with the plaintiff, the court confirmed that the common law notice prevailed
over the purported policy.
As to the issue of compensation for the loss of bonuses,
the court described the circumstances when employers must pay bonuses as a
component of termination compensation. The plaintiff’s original contract
entitled her to an annual bonus on the condition that she was employed on
November 30th of each year. The defendant had paid her the bonus for 2012, but
she claimed that she was entitled to the bonus for 2013. The court emphasized
that in general, a terminated employee is entitled to the bonus payments as
long as the bonus had been “an integral part of the employee’s annual salary”,
which it was in the plaintiff’s case. To determine whether an employee is
employed on a specified date for bonus purposes, the court clarified that the
employment period includes the time included in the period of reasonable
notice. Therefore, the court stated that had Ms. Bernier been given the
required reasonable notice under the common law, she would have been “employed”
on November 30th 2013, and thus eligible to receive bonus payments with her
salary and benefits package.
The court also concluded that a trial was not necessary to
examine the appropriateness of the plaintiff’s mitigation efforts stating that
the plaintiff had attempted to reasonably mitigate her losses and had provided
the court with a “large mitigation brief” that showed the extent of her
substantial, but unsuccessful, job search.
The court concluded that as there was no genuine issue
requiring a trial, summary judgment was appropriate, and the plaintiff was
entitled to compensation based on reasonable notice under the common law. The
court conducted the reasonable notice analysis based on the factors set out in Bardal
v Globe & Mail to determine Ms. Bernier’s notice period entitlement, and noted that the courts
have awarded a higher notice period for those who hold a highly skilled
position with considerable responsibility. As a result of Ms. Bernier’s age,
experience, level of responsibility and length of employment, she was awarded
compensation based on eighteen months’ pay in lieu of notice. Nygard was also
ordered to pay the plaintiff’s legal costs in the amount of $25,000.
D. CONCLUSION
Several lessons are to be learned from the Bernier decision. Firstly, employers, including charities and not-for-profits, should
be aware that a contract that violates the ESA minimum statutory
requirement will be void and unenforceable. An unenforceable termination clause
may prove costly, as the employee will revert to their common law rights.
Secondly, should an employer wish to amend a contract, the amended contract
should be signed by both parties to demonstrate consent by both parties to the
terms. Also, for the amended contract to be legally enforceable, the employee
must receive something of value in return, such as a pay raise, bonus,
additional vacation or improved benefits. Thirdly, it is risky for employers to
rely on a general policy to prove that a limited termination notice period
applies to an employee. An employer should not assume that the employee is
aware of the policy, or that the employee understands the policy applies to his
or her position. If the employer wants a notice period to apply to its
employees, then it should be made clear in a written agreement so that each
employee is aware of its application. Fourthly, bonus provisions should form
part of the written employment contract. If the employer’s intent is to not
include bonus entitlements on termination, or provide the employee with a
contractual right to a bonus, these are matters to be specified in the
contract.
