THE FACTS
In a recent 2016 decision, the Supreme Court of British Columbia ruled in favour of the Plaintiff-employee, awarding him pay in lieu of reasonable notice following a termination.
The Plaintiff was a helicopter technician for Canadian Heli Structures Ltd. (CHS), owned and operated by the Defendant, Alpine Aerotech Limited Partnership. During an inspection by one of the Defendant’s clients, the Plaintiff was questioned regarding his tools and work station. The Plaintiff’s responses were defensive, unprofessional and at times, rude. At one point, when asked about an uncalibrated depth gauge, the Plaintiff said something to the effect of “I guess this is garbage too,” and tossed it into the trash.
On the following day, the inspector met with CHS’ management to discuss his findings. At this meeting, Mr. Kenney—the inspector—briefly mentioned the Plaintiff’s use of a non-calibrated depth gauge, but expressed no issue with this and was satisfied that the Defendant had the properly calibrated tools available. When Mr. Davis spoke to the Plaintiff about the incident, the Plaintiff said that he will not be working on any “eff-ing Erickson aircraft.” Upon hearing about the incident and the Plaintiff’s subsequent remarks to Mr. Davis, the Defendant’s president—Mr. Denome—made the decision to terminate the Plaintiff. At 3:20 p.m. the Plaintiff was informed by Mr. Davis that he was fired. The Plaintiff was told that he needed to sign termination “paper work” before he went home. This paperwork contained a Release document, which would indemnify the Defendant from any and all claims arising out of the employment relationship, including any claims arising out of termination. In consideration for this Release, the Defendant would receive a waiver of $8,787.00 which he was told he would otherwise owe to the Defendant for a training seminar he attended during his employment.
The Plaintiff sued for 6 months’ pay in lieu of notice. The Defendant pleaded that either (1) the Plaintiff was terminated for just cause, which eliminated any duty on their behalf to give reasonable notice or pay in lieu of notice; or alternatively, (2) the Plaintiff signed a binding contract which released the Defendant of any duty towards the Plaintiff.
The judge found for the Plaintiff on both issues.
WHEN DOES INSUBORDINATION JUSTIFY TERMINATION FOR CAUSE?
The court’s ruling in this instance provides a strong defence for employees in the context of termination. Despite the employee’s highly unprofessional and potentially destructive behaviour during the investigation, the court found that this did not warrant termination for cause.
The Defendant argued that the company had been under serious financial pressure due to lack of business contracts and that a positive review by the investigator was crucial for their survival. The Plaintiff’s actions were not only unprofessional, but they came at a time when the company found themselves in a highly precarious financial situation, and amounted to conduct that could have been lethal for the company.
The court, however, found that this conduct warranted, at most, disciplinary action falling short of termination. The investigation did not result in the loss of the clients’ business. Mr. Kenney was generally satisfied with investigation, and specifically stated that he did not care whether the Plaintiff threw things in the garbage so long as he used a calibrated gauge. Although the Plaintiff was aware of the pending investigation, he was not prepared by the Defendant whatsoever and his frustration was not entirely unwarranted. The judge found that management knew the Plaintiff was no “shrinking violet,” and that he may act out if he felt backed into a corner. Insubordination will not justify termination for cause unless the employer can establish that the employee breached “essential conditions of the contract of service.” Neither the Plaintiff’s conduct during the investigation nor his comments to Mr. Davis on the following day amounted to the level of insubordination required to justify termination for cause. The Defendant should have consulted the Employee Handbook dealing with discipline and acted accordingly.
This establishes the difficulty employers face in firing employees without giving reasonable notice. Even in instances of insubordination, the actions of the employee must be such that they breach a fundamental element of the employment contract. This sets a very high threshold and makes it very important for employers to consult a lawyer prior to making a decision to terminate for cause, otherwise they risk liability to pay for reasonable notice. Likewise, employees need to consult legal professionals as soon as they have been terminated to address any rights they may have under statute or common-law, and especially before they sign any documents regarding a termination.
SIGNING A RELEASE
In this instance, the judge found that the Release contract was not enforceable as against the employee because there was no consideration given, and even if there was, the contract would be set aside due to unconscionability.
The Release contract in this case was unenforceable because the Plaintiff received no consideration in exchange for signing the contract. In order to form a binding contract, something needs to be exchanged. When signing a contract, the signing party must receive consideration—or some kind of benefit, either monetary or of some other nature, in exchange for their signature. This is an essential element of a contract, absent which courts will not uphold the contract. In this case, the Plaintiff was told that he would be freed from any financial obligations owed to his employer for the $8,787.00 training he received on the company’s dime. However, the judge found that the company in fact could not claim reimbursement for this cost in the context of a termination without cause, and therefore no actual consideration was given. The contract was deemed null and void. Nevertheless, the judge conducted an unconscionability analysis, and found that even if there was consideration, this contract would have been unenforceable due to unconscionability.
Unconscionability is a concept used in contract law to set aside contracts that are so unfair that it would be unconscionable for a court to enforce them. In order to establish that a contract is unconscionable, the party must show that the transaction, seen as a whole, is so divergent from community standards of commercial morality that it should be rescinded. Two factors must be present for a contract to be unconscionable: (1) a weakness in the bargaining position of one side; and (2) the taking of unfair advantage of the other side.
In this case, the judge found both factors were present. The Plaintiff-employee was financially unstable and had very little formal education. When presented with the release documents, the Plaintiff was scared and confused by the recent news of his termination, which was shown by his inaccurate witness testimony regarding the circumstances of the termination. On top of that, the Plaintiff had a wife and child to support which concerned him greatly at the time. The Plaintiff was given misleading information regarding his rights. The Plaintiff was told that he could be terminated for cause and that he may be required to reimburse the Defendant for the $8,787.00 training he received. Both of these statements were false at the time they were made. Moreover, the Release documents contemplated complicated legal concepts and pertained to rights and obligations that the Plaintiff was not equipped to handle at the time. The Plaintiff could not have been expected to review these documents and make a reasoned decision within the time he was given. The outcome was a patently unfair contract, wherein the Defendant was released from their duties to the Plaintiff who was given nothing in return. As a result, the Release document, even if it was a properly executed contract, would not be binding due to unconscionability.
The court’s finding regarding the Release contract is a signal to all employers to tread carefully when seeking an employer to enter into a Release contract. Unconscionability is something employers need to be particularly weary of because courts will often be inclined to finding unequal bargaining power between employees and their employer. This places a greater onus on employers to ensure that the proper due diligence has been conducted when offering a Release contract. A good way to avoid having a court dismiss a Release contract ex post facto is by giving the signing party a few days take home the contract before signing it. In theory, this gives the signing party some time to seek professional legal advice and the opportunity to contemplate the contents of the contract. Later on, the signing party will be less likely to rely on the argument of ‘unconscionability’ if seeking to set aside the contract.
See: Saliken v Alpine Aerotech Limited Partnership, 2016 BCSC 832 CanLII
