Employment Update

By Barry W. Kwasniewski and Martin U. Wissmath

Apr 2023 Charity & NFP Law Update
Published on April 27,2023



Doctor CEO Entitled to 5 Years’ Salary for Wrongful Dismissal

A verbal agreement between an employer and employee can still be contractually enforceable, even when it conflicts with a written contract that is signed afterwards. On February 15, 2023, the New Brunswick Labour and Employment Board (the “Board”) released its decision in the case of Dornan v New Brunswick (Health). The Board considered a verbal agreement (the “Verbal Agreement”) between an employee and employer, and a later written contract that changed the terms regarding termination (the “Written Contract”) by adding a termination clause. The Board found that the termination clause was unenforceable, as it amended the Verbal Agreement without providing fresh consideration to the employee. This case is of interest for charities and not-for-profits as an example of the importance of ensuring that amendments to employment contracts provide employees with adequate consideration, and to treat all employees with respect in the termination process to avoid additional claims for aggravated damages.

In March of 2022, Dr. John Dornan was brought on as the interim CEO and President of Horizon Health Network, a network of hospitals in New Brunswick, for a fixed term of five years. In effect, the employer was the provincial Minister of Health (the “Minister” or the “Employer”). Specifics of this Verbal Agreement were parsed out verbally and via text message, including $360,000 salary plus benefits. Two weeks after he began working in his new role, Dr. Dornan was provided with a Written Contract, back dated to before his employment began. It included a termination clause which limited severance pay upon termination to 12 months during the first year of employment, something that was not discussed during initial negotiations. Dr. Dornan was not happy about the addition of the termination clause, but felt he was in a precarious position as an interim CEO, so he accepted and signed.

In July of 2022, a patient died in the waiting room of a hospital within the Horizon Health Network, which resulted in intense criticism of the organization by the public and media. This resulted in Dr. Dornan being terminated from his position, via a phone call from the Minister, which was then announced later that day at a press conference by the New Brunswick Premier. Dr. Dornan then filed a grievance relating to the termination under New Brunswick’s Public Service Labour Relations Act.

The Board found the Written Contract was an amendment of the Verbal Agreement between Dr. Dornan and the Minister. Dr. Dornan had begun working under the conditions stipulated in the Verbal Agreement, and was therefore already working under a valid employment contract.  By having the employee sign a Written Contract with a termination clause that was not included in the Verbal Agreement, the Employer added an amendment. As required by basic contract law principles, the Board noted, the amendment required further consideration, and as there was no change to Dr. Dornan’s compensation or other forms of consideration, the amendment was invalid. The Board found that he was entitled to the entire amount of his benefits and compensation for the remaining five-year term of employment according to the Verbal Agreement.

The Board then found that Dr. Dornan did not fail to mitigate his damages, as the Minister did not bring any evidence to demonstrate that he had failed his duty to mitigate. Dr. Dornan argued that he did not have a duty to mitigate, as he was under a fixed term contract. This standard has been used in a number of Ontario cases (e.g. Bowes v. Goss Power Products Ltd., Howard v. Benson Group Inc. and Mohamed v. Information Systems Architects Inc.), and the Board declared that this line of reasoning was compelling, but it was unnecessary to rule on the matter because of the Employer’s lack of evidence.

Finally, the Board concluded that because of the lack of good faith from the Minister, Dr. Dornan was owed aggravated damages. He was fired via a phone call, which was then announced to the public, all without a chance to discuss the matter with the Employer. The Board noted that the public was left with the incorrect impression that Dr. Dornan was in some way responsible for the hospital death, which caused harm to his professional reputation. This resulted in $200,000 in aggravated damages atop the five years of pay and benefits to which he was entitled.


Read the April 2023 Charity & NFP Law Update