The Ontario Superior Court has released a decision which serves to remind employer and employees of the responsibility to speak up when unhappy with a change the terms of employment.
The case, Whittemore v. Open Text Corporation, involved an employee who was employed as a Software Developer with Open Text Corporation (“Open Text”). His employment was terminated after 17 years of service and he was provided termination pay in the amount of the statutory minimums under the Ontario Employment Standards Act, plus four weeks.
The company provided this amount because it was consistent with the termination payment described in an employment contract which the employee had signed with the company prior to its purchase – by way of a share purchase – by Open Text. The employee’s employment was specifically terminated nine years after Open Text had taken over ownership of the company.
The employee did not receive a new employment contract following the share purchase. Instead, the employee only received a non-solicitation and confidentiality agreement. He was also told that he was no longer eligible to be provided with a one-month sabbatical. The employee did not raise any issue with respect to these issues.
Following the termination of his employment, the employee sued Open Text for wrongful dismissal, claiming that the employment contract which he signed prior to the share purchase was invalid, and that accordingly he was entitled to full common law termination pay entitlements.
The Ontario Superior Court disagreed. Instead, the court held that the employee was bound by his previous employment contract, which included restrictions on his entitlement to termination pay. The court specifically held that the original contract was at no point replaced by a new contract with Open Text.
In coming to this conclusion the court stated that the non-competition and confidentiality agreement did not serve to replace the employment contract or otherwise invalidate the old agreement. Importantly, the court noted that the employee never stated to Open Text that he considered his previous employment contract to be null and void. The court specifically observed that the employee continued to work with Open Text and at no point stated that he considered himself free from the terms of the his original contract.
Why does this case matter?
The case serves as a reminder that courts expect employees to state clearly that they consider that their employment is no longer valid, if that is the case. It is not good enough for an employee to remain silent and later decide that they have an issue with the terms of employment. This is particularly the case in the event of a share purchase, where the purchaser is assumed to take on all of the obligations of the previous owner.
The case however also serves to remind employers of the importance of carefully managing an employee’s expectations with respect to the terms of employment. Specifically, it is important that employers proactively respond to employees where they raise concerns with respect to the terms of their employment. As this case makes clear, silence on the part of employers or employees can significantly increase the chances that a party will be found liable for terms to which they otherwise did not agree.