A Word Of Caution For Employers: When Terminating Employees Say What You Mean And Mean What You Say

• Published date: 18 November 2020
• Subject Matter: Employment and HR, Contract of Employment, Unfair/ Wrongful Dismissal
• Law Firm: Cox & Palmer
• Author: Ms Ashley J. Arbour and Jessica Bungay

What do employment contracts and termination letters have in common? They both have the potential to end, or at least limit, an employer's liability in the event of a termination. However, to be effective, they must be properly drafted. A termination letter that fails to assert just cause for termination, and specify the reasons for cause, will be ineffective, even if cause for termination exists. Likewise, a without cause termination provision in an employment contract will be invalid and unenforceable if it is not properly worded and attempts to contract out of the statutory minimums established by the Employment Standards Act.

The recent decision of the New Brunswick Court of Appeal in Abrams v. RTO Asset Management, 2020 NBCA 57 ("Abrams") addressed both of these issues and serves as a cautionary tale for employers.

Background

James Abrams was employed by RTO Asset Management ("RTO"), and its predecessors, for approximately 29 years. The terms and conditions of Mr. Abrams' employment were set out in a detailed Employment Contract which included, among other things, a provision relating to termination without cause which stated as follows:

The Company may terminate your employment at any time without cause by providing you with written notice or pay in lieu of notice equivalent to your statutory entitlement under the province of New Brunswick employment standards legislation. If the Company terminates your employment pursuant to this paragraph, the Company shall not be obliged to make further payments to you and you will not be entitled to any additional payments under the common law as a result of the termination. In addition, the payments and notice provided for in this paragraph are inclusive of your entitlements to notice, pay in lieu of notice or other severance pay pursuant to the province of New Brunswick employment standards legislation.

The provision limited Mr. Abrams' notice entitlement to the minimum notice prescribed under the Employment Standards Act and alleviated RTO from having to make any further payments to Mr. Abrams.

Mr. Abrams' employment was terminated in 2017 forhaving engaged in a sexual and romantic relationship with a subordinate employee. Mr. Abrams had hired the subordinate employee, disclosed confidential information to her, and later promoted her, all the while keeping their relationship concealed from RTO. When confronted with the allegations about his relationship with the subordinate, Mr. Abrams was initially dishonest...