Canadian Employment Law Today

Canadian Employment Law Today | 3 Canadian HR Reporter, a Thomson Reuters business 2018 Cases and Trends Employer gets out of 7-year contract but must still provide reasonable notice Employee breached fiduciary duty when he drew up own unenforceable contract, but employer didn't have just cause to dismiss him BY JEFFREY R. SMITH AN EMPLOYMENT contract with a gen- erous termination clause created out of the worker's collusion and a conflict of interest is unenforceable, but the employer still has to have just cause for dismissal. Such was the case for an Ontario casino who got out of a seven-year contract with its general manag- er that had no early termination clause but still had to pay six-and-one-half months' pay in lieu of notice because it didn't follow its own progressive discipline policy. Tyler Waddilove was the general manager of the Muncey-Delaware Nation Paradise Bingo, a bingo hall located on the Muncey- Delaware First Nations reserve in Ontario. e bingo hall is a charitable corporation and all shareholders and the board of direc- tors are band members of the Muncey-Dela- ware First Nation. Paradise Bingo was incorporated on Jan. 31, 2008, and Waddilove was hired as its op- erational manager. After growing up on the reserve, Waddilove had completed one year of an international business program with the intention of working at international ca- sinos and then worked for one year at Casino Rama in Orillia, Ont. Early on in his employment with the Paradise Casino, Waddilove was terminat- ed for cause after being captured on video asleep at his desk. He was rehired in the same position on March 1, 2009, but was suspended without pay in December 2010. After Waddilove filed a complaint with the labour board, the casino offered him the position of general manager in September 2011. Waddilove accepted the promotion and dropped his complaint. At the time of his rehiring to the position of general manager, the casino's board of di- rectors included his father, a close friend of his father's, and a former employee of his fa- ther. e band chief was his cousin. Worker drew up generous contract for himself A few months later, on Feb. 1, 2012, Wad- dilove raised the idea of employment con- tracts for casino staff at a board meeting. He said the contracts would improve job securi- ty for employees, attract better workers, and improve staff morale. e board agreed and tasked Waddilove with drafting the standard contract to be used for all employees. Waddilove drew up contracts for casino employees. e one he drew up for himself was for a seven-year term and required at least two weeks' notice by either party to terminate the agreement. In addition the contract stated that "At any time if there is a change in board of directors or a restruc- turing, this contract will be honoured in its entire length. Any (dismissal) that does not have sufficient grounds will declare all wages of the remaining contract is paid out in full. is also includes demotion, layoff, lack of work, decrease in pay, change of ti- tle, and shutdown of business."Waddilove, his father, his father's friend, and his father's former employee all signed his contract on Jan. 1, 2013. Contracts for other casino employees were mostly for one or two years, with the exception of the operational manager, who was given a five-year term. All contracts — with the exception of Waddilove's — con- tained a termination clause that limited no- tice entitlement for without-cause dismissal to "an amount as required by the Employ- ment Standards Act, 2000 or other such leg- islation as may be in effect at the time of ter- mination. is payment shall constitute the employee's entire entitlement arising from said termination." In March 2013, a new board of directors for the casino and a new band chief were elected, none of whom were related to Wad- dilove. On Sept. 1, 2015, the board — who was unaware of Waddilove's employment contract — terminated his employment and provided statutory notice, paying his salary until Nov. 1. Waddilove produced his con- tract that provided for payment of wages for the balance of its term until January 2020 upon termination for any reason without cause. He filed a claim for the additional four-plus years of pay. Contract suspect for multiple reasons e Ontario Superior Court of Justice noted that when Waddilove was rehired in September 2011 and appointed to the posi- tion of general manager — the most senior management position at the casino — it should have been clear that if the board of directors changed, his job security would be at risk. However, at that time he didn't ask for a fixed-term contract guaranteeing his employment. In addition, when he signed his contract in January 2013, there was no change to his job duties or salary. erefore, there was no fresh consideration given to the casino in exchange for him receiving what was essentially seven years' notice of termi- nation, the court said. "When there is an absence of fresh con- sideration in a continuing employment rela- tionship, the contract will be held to be un- enforceable," said the court. e court also found that the Ontario Busi- ness Corporations Act (OBCA) required "every director or officer of a corporation in exercising his or her powers and discharging his or her duties to the corporation shall act honestly and in good faith with a view to the best interests of the corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in compa- rable circumstances." However, Waddilove drew up a contract for himself that was the only one that didn't provide the casino with the right to terminate without cause with payment of the statutory minimum. He gave himself special treatment and couldn't ex- plain why he didn't bring this to the attention of the casino's board of directors. e court also noted that the casino board members who signed Waddilove's contract — all with close ties to him — were ousted two months later and Waddilove didn't mention anything to the new board members about the newly-signed employ- ment contracts. "To suggest the circumstances surround- ing the execution of the contract have a strong odour of collusion would be an un- derstatement — they reek of collusion," said the court. "It is difficult to imagine a greater situation of conflict than the one created by (Waddilove) when he drafted and executed his own employment contract with his fa- ther, his father's friend and his father's em- ployee executing the contract on behalf of the (Paradise casino)." e court determined Waddilove All contracts — with the exception of the general manager's — limited notice entitlement to ESA minimums. CASINO on page 7 »

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