Executive agreed to changes but claimed employer made additional changes without notifying him
This instalment of You Make the Call involves a contract dispute between a satellite radio company and a programming executive.
Ross Davies, 57, was an experienced broadcast executive who was hired by Canadian Satellite Radio (CSR) to be its vice-president of programming for a startup satellite radio station in September 2005. He initially was retained through his consulting company and was later hired full-time for CSR while discontinuing his consulting work.
In December 2005, CSR went public and all its employees had to have formal employment contracts. CSR presented Davies with a contract on short notice and he signed it without legal advice. The contract formalized that he reported only to CSR president and he could terminate the contract for “good reason” with written notice. If he did so or was dismissed without cause, Davies would be entitled to one year’s salary plus bonus.
In 2007, CSR was having financial difficulties and it decided to make “across-the-board” cuts. Thirty employees who reported to Davies were laid off and Davies was told changes would have to be made.
Davies met with CSR president, John Bitove, on June 22, 2007. Bitove told Davies the company couldn’t afford to pay him full-time anymore and Davies would be moved into a part-time position with less than half his regular salary, effective Sept. 1. Davies convinced Bitove to pay him a higher amount, but still significantly less than his full-time salary. Bitove also agreed to give Davies $25,000 in restricted stock units to cash each year to make up for no bonus and a three-year guarantee of employment.
Two days later, Davies emailed Bitove to confirm their discussion and to work out the “finer details.” He received no response until Aug. 16, when CSR executive vice-president, Stewart Lyons, emailed Davies and offered a two-year commitment with an option for a third year and no stock units. Davies was shocked and on Aug. 31, told CSR he couldn’t accept the changes to his employment and considered himself constructively dismissed.
CSR argued the meeting with Bitove was for negotiation and not a confirmation of a new agreement. It pointed to Davies’ follow-up email that discussed further negotiation and working out details and the fact his employment status hadn’t changed at the time of his resignation.
You Make the Call
Could Davies claim constructive dismissal?
OR
Did Davies accept the changes by continuing to work and negotiating the terms of his contract?
IF YOU SAID Davies was constructively dismissed, you’re right. The court found the changes to Davies’ pay and reporting structure were fundamental changes of his employment contract. Davies’ meeting with Bitove was an offer of new contract terms and it was reasonable for Davies to assume he had reached a new agreement and his mention of negotiating other details in the email was not used in a “legalistic sense” as he was not a lawyer, said the court. Davies made it clear at that point he believed it was a “done deal.”
The court also found that because the changes didn’t take effect until Sept. 1, he had the right to try to change things before refusing to accept the changes. As he declared his refusal the day before the changes came into effect, he was still within that right, said the court. In addition, Lyons did not inform Davies of the additional changes to Bitove’s terms until Aug. 31, so Davies wasn’t given the chance to think about them.
