Canadian Employment Law Today

June 12, 2019

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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Canadian HR Reporter, 2019 Canadian Employment Law Today | 3 Cases and Trends Move up the ranks frees worker from original termination notice limit Promotions, increased responsibilities and pay make termination provision from time of hire no longer fair or enforceable: Court BY JEFFREY R. SMITH THE TERMINATION provision limiting a Saskatchewan worker's notice entitlement that was signed when the worker first joined the employer is no longer enforceable af- ter 11 years and multiple promotions, the Saskatchewan Court of Queen's Bench has ruled. Grant McKercher, 51, was hired by Stan- tec Architecture (SAL) in April 2006 as a staff architect. McKercher's employment contract stipulated his salary would be paid by SAL's affiliate company, Stantec Consult- ing (SCL) — which provided administrative and office management services to SAL — and included a termination provision stating that he would receive, upon without-cause termination, the greater of: two weeks' no- tice or pay plus one additional week for each completed year of service after two years — to a maximum of three months' pay or notice — or the "minimum notice of termination (or pay in lieu of notice) required by appli- cable statutes." McKercher's job duties involved project design and project administration. Over the next several years, he received multiple promotions and, by 2017, his job title was business sector leader in Saskatoon, report- ing directly to a SAL vice-president and with a salary more than double that of when he first joined SAL as a staff architect. His re- sponsibilities at this point included business strategy, managing the client base, business development, networking, and staff supervi- sion, hiring, and firing. Employer stuck to original termination provision On Nov. 21, 2017, SAL terminated McK- ercher's employment. e termination let- ter — on SAL letterhead but signed by SCL's vice-president — referred to the 2006 em- ployment agreement and its termination provision, offering McKercher 11 weeks' pay in lieu of notice. McKercher claimed wrongful dismiss- al, arguing that his original employment agreement no longer applied, as the "na- ture, circumstances and responsibility" of his employment had changed significantly —eroding the "substratum" or foundation of the 2006 employment agreement — so the three-month notice limit placed on him when he was a staff architect wasn't reason- able. He also said his employer who signed the employment agreement wasn't the same employer who terminated his employment, as his position had evolved into one with SCL. SAL countered that McKercher's eventual promotion was contemplated when he was originally hired and the termination clause was intended to apply to him as he was pro- moted. It also said McKercher was aware of the relationship between SAL and SCL when he signed the employment agreement. e court first addressed the issue of who McKercher's employer actually was by the time his employment was terminated. It noted there were several entities bearing the name "Stantec" and both SAL and SCL were involved in McKercher's employment. However, while there may have been some confusion, there was no indication at any point during McKercher's tenure that his employer changed from the one who hired him. He was paid through SCL from the be- ginning but remained an employee of SAL, which ultimately didn't matter because "an enforceable contract of employment would follow the employee in any transfer or as- signment of the employment arrangement," the court said. As for McKercher's claim that the sub- stratum of his employment had changed and rendered the employment agreement unenforceable, the court referred to previ- ous court decisions such as the 2012 On- tario case of MacGregor v. National Home Services, where it was established that the "substratum doctrine provides that if an employee enters into an employment con- tract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employ- ment, the important terms of the agreement concerning the employee's responsibilities and status has significantly changed." Fairness of contract can change as responsibilities increase: Court is line of reasoning recognizes that terms in employment contracts that may be fair when an employee joins a company — as McKercher did when hired as a staff archi- tect in 2006 — could become unfair as the employee's tenure increases and she gains skills, higher pay, or more responsibilities — such as McKercher's role by 2017. is can erode the foundation of the employment contract so that a limit on reasonable notice of termination established in the beginning are no longer appropriate, said the court. "e idea behind the substratum doctrine is that with promotions and greater atten- dant responsibilities, the substratum of the original employment contract has changed, and the notice provisions in the original employment contract should be nullified," said the Ontario Superior Court of Justice in MacGregor. e Saskatchewan Court of Queen's Bench found that McKercher's responsibili- ties and the nature of his employment sig- nificantly changed during his 11-year tenure with SAL. ere was no indication at the time of his hire or in the wording of his em- ployment contract that SAL contemplated the extent of his promotions, as the com- pany claimed in its defence to McKercher's complaint. e court also found that each time McK- ercher was promoted, SAL didn't make it clear to him that the termination provision from his original employment agreement would apply to his new position. ere was no specific wording that referred to the com- pany's intent in this matter and management didn't raise the issue with him at each pro- motion, said the court. Ultimately, the court determined that SAL didn't protect the notice limit set out in the employment agreement McKercher signed when he was first hired by the company. e changes and advancement in McKercher's job duties during his career with SAL over- took the original notice provision, making it unenforceable. As a result, McKercher was entitled to common law notice of termina- tion, which the court determined to be 12 months based on his age, position, difficulty of finding similar employment, and years of service. SAL was ordered to pay McKercher 12 months' salary, benefits, and bonus in lieu of notice. Less the 11 weeks' pay the company had already provided, the total damages for wrongful dismissal owing to McKercher was $143,467. For more information see: • McKercher v. Stantec Architecture Ltd., 2019 SKQB 100 (Sask. Q.B.). • MacGregor v. National Home Services, 2012 ONSC 2042 (Ont. S.C.J.).

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