Fri 2nd November 2018 by Joel Fairbrother
The recent Alberta case Jonasson v Nexen, 2018 ABQB 598 (“Jonasson”) is a recent step in the direction of employee rights in Alberta, because it affirms obligations of honesty and fairness on employers in the province, with potentially sweeping implications.
Jonasson will also likely serve as a reminder to employees that they should always seek legal advice if their employment is terminated, and this is especially so when the employer has done something dishonest or seriously unfair with respect to the employee leading up to or at the time of termination of employment.
In Jonasson, the Plaintiff Hans Jonasson had been employed by the employer for 22 years, was 55 years old, and had managed a research and development program at the employer which was specialized and considered to be cutting edge.
Mr. Jonasson decided he wanted to take a leave of absence, and signed an agreement with the employer (the “LOA Agreement”) which stated that the employer would make reasonable efforts to find him a suitable role within the organization upon his return, and that if a suitable role was not found, he would be “considered to have resigned” and not eligible for severance. He was slated to go off on his leave several months after he actually signed the LOA Agreement.
The Court found that at the time the LOA Agreement was signed, the employer’s management had been planning a workforce reduction at Mr. Jonasson’s level and that Mr. Jonasson was unaware of this. Before Mr. Jonasson actually went on leave, the employer’s management had put him on a “cut list” of people who would likely be let go, but the employer’s management did not tell him this prior to him going on leave. Mr. Jonasson went on leave. The employer made a generalized effort to find places for all management on the “cut list”, but the Court found it made no special effort for Mr. Jonasson prior to making a final decision to “exit” Mr. Jonasson. Mr. Jonasson was advised that the employer did not find a position for him and that his employment was deemed to have resigned his employment.
The Court disagreed with the position of the employer and invalidated or otherwise ignored the LOA Agreement for several reasons, including:
- It was not truly an “agreement” because the parties had a very different understanding of the facts;
- The LOA Agreement purported to retroactively deny Employment Standards Code severance to the employee, which made it void;
- A “resignation” requires a subjective intention to leave one’s job, which was not present in Mr. Jonasson when he signed the LOA Agreement.
The Court determined that Mr. Jonasson’s employment had been terminated by the employer, and that he was owed severance. Mr. Jonasson was entitled to a reasonable notice period of a whopping 23 months, considering his age, character of employment, years of service, and other relevant factors.
Next, the Court analyzed whether the actions of the employer in terminating the employee should result in punitive damages being levelled against the employer. The Court found that punitive damages were appropriate for several reasons, including:
- The employer had an obligation to act in good faith, which includes a duty of honest contractual performance;
- Acting in “good faith” requires an employer to be honest, reasonable, candid and forthright;
- The employer failed to act with candour and forthrightness by permitting Mr. Jonasson to enter the LOA Agreement when, as a company, the employer knew a significant percentage of management positions were going to be cut, and by the time of his leave, knew that he was one of the targets. Importantly, the Court found that the workforce reduction and LOA Agreement was not directly connected or concerted within the employer at first, but when the employer realized the two were connected it still did not make “reasonable” efforts to find Mr. Jonasson a job prior to marking him for “exit” and still kept the workforce reduction a secret. The Court considered that “reasonable” efforts in the context of the LOA Agreement would have required particularized efforts for Mr. Jonasson as opposed to the generalized efforts the employer made for all of management;
- The Court summarized its conclusion this way:
[The employer] attempts to hold Mr. Jonasson to his end of the agreement while failing to honor its own. In effect, [the employer] exploited an agreement that was obtained through and continually characterized by a material lack of candour to deem Mr. Jonasson’s departure a resignation, thereby evading any obligation to pay severance. [The employer] acted in bad faith.
The Court awarded the employee $20,000.00 in punitive damages punish the employer for its actions leading up to the termination of employment. Very significantly, the Court noted that it was fixing the punitive damages at $20,000 in part because a smaller award would not sufficiently punish or deter a large employer such as this one from similar conduct in the future.
Lesson for Employers
Jonasson should serve as a lesson to Employers: entering an arrangement with an employee with knowledge that the arrangement will not work out as the employee reasonably expects is dangerous, because Courts may be inclined to both refuse to allow the employer the benefit of the arrangement and to punish the employer for trying to rely on the arrangement in the first place.
Reasonable notice severance can work out to a great deal of money. Considering this liability, it is not surprising that some employers will attempt almost anything to protect themselves from it. Jonasson does not mean an employer cannot negotiate with its employees and protect its own interests, but it should serve as a warning that if the employer knows something the employee ought to know in order to make an informed decision prior to signing an agreement, the arrangement might create more liability for the employer than it cures. If you are an employer considering negotiating special terms of employment with an employee, give Taylor Janis LLP a call first and we can assist you in determining the right path forward.
Opportunity for Employees
Jonasson also serves as an opportunity for Employees: if an employer is trying to rely on the “fine print” or other circumstances which do not seem quite right in order to disentitle you from something at the time of termination, you might be entitled to considerably more than the employer is suggesting.
If you are a recently-terminated employee of any kind, give Taylor Janis LLP a call and come for a consultation prior to signing anything with your former employer (if possible). Sometimes employers make fair reasonable notice severance offers, but often that is not the case. If you sign something prior to speaking with an employment lawyer you could be giving up a great deal of money.