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<\/a><\/div>\nAn employer\u2019s mistake as to its legal obligations can invalidate a contractual termination provision.<\/p>\n
In Perretta v. Rand A Technology Corporation<\/b><\/em>, 2021 ONSC 2111 (CanLII)<\/a>, Justice Andrew A. Sanfilippo held that an employer\u2019s refusal to pay its former employee the two weeks to which she was contractually entitled\u2014unless she first signed a full and final release, constituted a repudiation of the employment contract, thereby entitling her to common-law damages.<\/p>\n <\/p>\n The Plaintiff, Ms. Perretta, began work with the Defendant, Rand A Technology Corporation, on September 29, 2014, initially in the role of customer advocate, pursuant to a written employment agreement dated September 11, 2014. <\/p>\n Effective November 1, 2018, Ms. Perretta was promoted to the position of sales representative pursuant to a new employment contract dated October 23, 2018. <\/p>\n The 2018 Employment Contract provided that Rand could terminate Ms. Perretta\u2019s employment without cause by providing two weeks of notice or pay in lieu of notice plus the minimum notice or pay in lieu of notice, benefits and severance pay required by the Employment Standards Act, 2000.<\/p>\n Ms. Perretta\u2019s employment was terminated, without cause, on March 31, 2020, by Rand\u2019s letter of termination handed to Ms. Perretta that day. <\/p>\n Rand admitted that it made a mistake by refusing to pay Ms. Perretta the agreed-upon two weeks\u2019 pay unless Ms. Perretta first executed a Full and Final Release, which was presented to Ms. Perretta as a component of an \u201cEnhanced Severance\u201d offer.<\/p>\n Ms. Perretta sent a letter to Rand on April 1, 2020 pertaining to her dismissal. Rand replied by letter on April 2, 2020 and demanded, again, that Ms. Perretta execute a Full and Final Release as a condition to her receipt of the two weeks\u2019 pay owed to her by the Termination Without Cause Provision. Ms. Perretta retained a lawyer who wrote to Rand that its treatment of its employee was in breach of the 2018 Employment Contract. Rand responded on April 24, 2020, through its legal counsel, and apologized for requiring that Ms. Perretta sign a Full and Final Release. Rand then transferred to Ms. Perretta the equivalent of two weeks\u2019 pay and the monetary value of her entitlements under the ESA.<\/p>\n The parties could not agree on the compensation to which Ms. Perretta was entitled upon her dismissal. Ms. Perretta argued that Rand had repudiated the 2018 Employment Contract and that she was thereby entitled to damages for wrongful dismissal at common law without the limitation imposed by the Termination Without Cause Provision. Rand responded that it merely made a mistake, had since apologized, and should still be allowed to limit Ms. Perretta\u2019s entitlements on dismissal to those set out in the Termination Without Cause Provision.<\/p>\n Justice Sanfilippo provided the following reasons for allowing Ms. Perretta\u2019s claim for wrongful dismissal damages:<\/p>\n [24] Rand submitted that it made a mistake. Undoubtedly it did. Rand refused to pay its employee the two weeks\u2019 salary to which she was contractually entitled on dismissal and instead demanded several substantive terms as preconditions to Ms. Perretta receiving the termination payment. The question is whether the Defendant\u2019s breach constituted a repudiation of the 2018 Employment Contract. It did, for reasons that I will now explain.<\/p>\n \u2026<\/p>\n [32] I am satisfied that a reasonable person assessing the Defendant\u2019s conduct would conclude that in demanding that its employee execute a Full and Final Release and comply with the terms of an \u201cEnhanced Severance\u201d offer as preconditions to receiving the two weeks\u2019 pay to which the employee was contractually entitled, Rand no longer intended to be bound by the 2018 Employment Contract. I reach this conclusion accepting Rand\u2019s admission that it made a mistake. Even if Rand\u2019s mistake was innocent and resulted from a simple lack of understanding of the very employment contract that it had drawn, and even if I accept Rand\u2019s evidence that it did not understand its obligations at law until so advised by counsel for its employee, that does not exhaust the analysis. My assessment is whether the Defendant\u2019s conduct evidenced an intention not to be bound by the 2018 Employment Contract, assessed objectively. It does.<\/p>\n \u2026<\/p>\n [34] Rand\u2019s breach was not \u201cone act isolated from its surrounding circumstances\u201d, as it contends, [\u2026] It is a series of acts: the March 31, 2020 termination letter; the drafting of a detailed Full and Final Release with multi-faceted terms; the imposition of several additional entitlements in the proposed Enhanced Severance offer; and doing so not once but twice, by restating its demands in its letter of April 2, 2020.<\/p>\n [35] The test for repudiation requires assessment of the impact of the breaching party\u2019s conduct on the innocent party. The breach must deprive the innocent party of \u201csubstantially the whole benefit of the contract\u201d: Remedy Drug Store, at para. 50.<\/p>\n [36] By terminating Ms. Perretta\u2019s employment, Rand was bringing the 2018 Employment Agreement to an end. The two weeks\u2019 salary in lieu of notice was the only monetary entitlement available to Ms. Perretta under the 2018 Employment Contract upon without cause termination, apart from her statutorily prescribed ESA entitlements. By refusing to pay the two weeks\u2019 salary, Rand deprived Ms. Perretta of the entirety of the monetary benefit available to her upon termination apart from the statutory benefits.<\/p>\n \u2026<\/p>\n [40] I have concluded that Rand showed an intention not to be bound by the 2018 Employment Contract in the time period between its dismissal of Ms. Perretta on March 31, 2020 to its revocation of its unilaterally imposed deadline of April 7, 2020. I find that the 2018 Employment Contract was repudiated on April 7, 2020, being the date on which Rand\u2019s unilaterally imposed demand for Ms. Perretta to comply with its new terms expired and thereby the date on which Rand refused to pay Ms. Perretta the two weeks\u2019 salary to which she was entitled on employment termination without cause and without notice. This breach could not subsequently be cured by the counsel\u2019s apology on behalf of Rand and by post-breach payment of the amounts owed, absent concurrence by Ms. Perretta, which was not forthcoming.<\/p>\n [41] This conclusion accords with the policy expressed by Court of Appeal in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, at para. 28, in the context of consideration of the consequences to an employer drafting a termination provision that fails to comply with the ESA. In applying the principle earlier expressed by the Supreme Court in Machtinger, at p. 1004, Laskin J.A. wrote: \u201cIf the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship.\u201d Similarly, if the only consequence to Rand for its imposition of new demands at the time of termination that deprived its employee of the benefit of the contract is to apologize and pay the amount that it was lawfully required to pay, there would be little or no incentive to comply with its termination provision.\n<\/p>\n<\/blockquote>\n As an additional point, Justice Sanfilippo would have also found that the termination provisions were unenforceable, had it been necessary to do so.<\/p>\n I have recently provided a full commentary on my opinions on repudiation by employer action in my post Repudiation by Allegation: The Risk of Falsely Alleging Cause<\/a>.<\/p>\n Without attempting to make this post too much of a marketing pitch, the takeaway from this decision for employers is to solicit legal advice as to your contractual obligations before<\/em> pulling the trigger on termination. Had the employer sought legal advice, and had it simply complied with its contractual undertaking, it is possible that the employee would have never complained. A small investment on the front end could have saved the employer not only the amount it was ordered to pay this plaintiff, but also its own legal costs and opportunity costs of dealing with the litigation. <\/p>\n If you are an employer and if you are looking to make some changes within your organization, let\u2019s talk about it \u2013 before the termination letter goes out.<\/p>\n The takeaway for employees is the standard advice: If you have received written confirmation of the termination of your employment, and if you have any questions about your legal rights, entitlements, or responsibilities, speak with a lawyer before you do anything and certainly before you sign anything.<\/p>\nFacts<\/h3>\n<\/p>\n
Decision of the Ontario Superior Court<\/h3>\n<\/p>\n
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Commentary<\/h3>\n<\/p>\n
Takeaways for Employers<\/h3>\n<\/p>\n
Takeaways for Employees<\/h3>\n<\/p>\n
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