Klyn v. Pentax Canada Inc., 2024 BCSC 372, is a recent Supreme Court of British Columbia decision, where the court held that the Defendant employer, Pentax Canada Inc. (the “Defendant”) couldn’t rely on the termination clause in the employment contract, as its conduct following termination of the Plaintiff employee, Brad Klyn amounted to a repudiation of the contract.
This case is important because it is part of a growing body of caselaw that makes it difficult to enforce termination clauses in the employment law context.
Facts
The following are the pertinent facts of the case:
- The Plaintiff worked for the Defendant for nearly 21 years as of the termination date.
- The Plaintiff earned a base salary of $100,000 and commissions.
- The employment contract between the Plaintiff and Defendant contained the following termination clause, which set out the Plaintiff’s severance upon termination without cause
TERMINATION ON NOTICE
In the event that the Company must terminate your employment for reasons other than Just Cause, the Company may do so upon providing you with, (in addition to payments pursuant to this Agreement that are owed to you up to and including the date of termination) working notice or payment in lieu of notice, (and statutory severance pay if applicable), limited to the greater of:
a) Your minimum entitlements pursuant to the Employment Standards Act only or;
b) 4 weeks per completed year of service prior to the signing of this Agreement, plus 4 weeks under this Agreement as an employee of Pentax Canada Inc. to a maximum of 18 months. The Company will continue only your Compensation during the applicable notice period hereunder in equal regular payroll instalments, or provide to you the equivalent pay in lieu of notice as a “salary continuation” and subject to your duty to mitigate.
For the purpose of this Termination on Notice section only, Compensation is defined as: the average of the commission payments paid or payable to you in the two (2) fiscal years completed (or part fiscal years) immediately before the date that your employment is terminated.
- The Plaintiff was terminated on a without cause basis, as such, he was entitled to salary continuance pursuant to the termination clause.
- The Defendant provided the Plaintiff with salary continuance for three (3) months.
- The salary continuance payments solely reflected the Plaintiff’s base salary and did not include commissions.
- The Plaintiff argued that the employment contract had been repudiated (breached), therefore he was entitled to common law reasonable notice.
- The Plaintiff also argued that he was entitled to 72 hours of accrued vacation.
- The Defendant disagreed and argued that its new vacation policy limited the amount of vacation its employees could carry over to following years (the “New Vacation Policy”).
Analysis / Conclusion
The court held that the Defendant repudiated the employment contract when it prematurely ceased salary continuance contrary to the employment contact. Consequently, the Plaintiff was entitled to common law reasonable notice, which the parties agreed to be 18 months.
In determining the Plaintiff’s compensation calculations during the common law reasonable notice period, the court ignored the compensation formula in the termination clause for the same reason the court refused to put a cap on reasonable notice: the Defendant had repudiated the contract. Rather, the court determined the Plaintiff’s compensation was the average income he had earned in the last two years of T4 income.
In determining the amount of accrued vacation, the Plaintiff was entitled to upon termination, the court did not rely on the New Vacation Policy. The court was of the position that the Defendant repudiated the policy when it failed to abide by its terms. The court could not enforce a policy that the employer itself did not comply with.
The court also held that the Defendant engaged in oppressive and reprehensible behavior worthy of punitive damages, when it implicitly threatened to withhold the Plaintiff’s salary continuance if he failed to sign a Full and Final Release, despite being entitled to it pursuant to the termination clause in the employment contract.
My Take
This decision is one of a growing body of caselaw indicating the court’s unwillingness to enforce a contractual term where the party who seeks to enforce the term failed to comply with the contract.
To put metaphorically, you cannot have your cake and eat it too. If a contracting party wishes to have a contract legally enforceable, they too are bound by its terms. Failing to do so could defeat the enforceability of the contract altogether.
Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
Amanda Jacinto is an employment and labour lawyer at Bow River Law in Calgary.
