Employee’s draft contract signed by minority owner and employee later rejected revised contract from principal owners
An Alberta employer must pay a former employee more than $76,000 after terminating a contract to which the employee never agreed, the Alberta Court of Queen’s Bench has ruled.
David Lovely, 48, had more than 20 years in the travel business and had intended to start a travel business in Edmonton when he arrived there in 2006 from the U.S. On Jan. 13, 2008, he received a temporary work permit that allowed him to work only for a corporation he incorporated himself so he could start his agency. However, in February 2008 he met with Wally Bychowski, who was one of the principal owners of McDonald & Bychowski, an Alberta corporation that ran an insurance brokerage. The owners also had a side business called Prestige Travel, which provided subsidized travel as a reward for customers of the brokerage.
In early March 2008, Lovely had another meeting, this time with all four owners – two principal and two minority -- of McDonald & Bychowski. They were interested in hiring Lovely to run Prestige and turn it around from a money-losing business to a successful one.
Further discussions were held and the owners asked Lovely to draft a business plan before they negotiated a final agreement. However, Lovely balked at this, saying that would be a major task that he would only do if they officially employed him. Lovely also said it would take two years to make Prestige profitable, so he needed an employment contract that would last at least that long.
Employee drafted contract
Lovely drafted a written document entitled “Prestige Travel Employment Contract” which recorded his understanding of terms discussed in the meeting. It stated he would be the president of Prestige effective April 1 with a salary and traveling account, plus a 20 per cent bonus “on the pre-tax profit of the company’s fiscal year.” Severance pay would be one year’s salary as long as he wasn’t terminated “due to illegal or overtly unethical actions.”
Lovely met with the owners and their corporate lawyer on March 13. Lovely presented his draft contract and negotiations proceeded to amend a few of the terms. Four days later, Bychowski contacted Lovely and told him his colleagues were excited about the project and wanted him to start right away. Lovely agreed as long as an employment contract was in place before he started, so they finalized the agreement over lunch. On March 20, Lovely brought his draft contract and a job description to the brokerage office and met with one of the minority owners of McDonald & Bychowski, who signed the documents. Lovely asked the owner to photocopy the documents on Prestige letterhead to show immigration officers for the purposes of a work permit.
In mid-April, the company presented Lovely with a draft employment contract which had changes, including a provision that the company could terminate the contract after one year without notice or cause and no severance would be provided if Lovely had been judged to have failed to meet the overall objectives set out in the contract. Lovely rejected this contract as he didn’t agree with the new severance provision and there was no business plan in place yet and therefore no business objectives.
Lovely was initially denied a Canadian work permit but was then given one in May 2008 after he submitted the job description the minority owner had signed. In his subsequent documents and communications, he referred to himself as president of Prestige. His business plan indicated Prestige would not make a profit until the third quarter of 2009.
The business plan didn’t unfold as expected over the next several months due to various factors. When Prestige’s office manager opposed Lovely’s plan and Bychowski backed her up, it eliminated any chance of Lovely’s business plan reaching its progression milestones.
In January 2009, Lovely asked the minority owner for a raise to which he was entitled under his March 20, 2008, contract. However, McDonald & Bychowski did not give him the raise.
Terminated under revised contract
On March 29, 2009, the two principal owners of McDonald & Bychowski met with Lovely and terminated his employment. The termination letter referred to the April 2008 employment contract – that Lovely rejected – and its severance provision. It stated the business objectives were not met and therefore Lovely would receive no severance pay. Lovely asked them for the severance pay stipulated in the March 20, 2008 contract, but they refused, saying they had no obligation to do so as they hadn’t signed it.
Lovely sued for the one year’s salary he claimed he was entitled to under the contract he had drafted and the minority owner signed on March 20, 2008. McDonald & Bychowski maintained it never agreed to that contract and the one it presented to Lovely the following month was the one in force.
The court found McDonald & Bychowski didn’t have a signed employment contract with the severance provision they were enforcing, since Lovely had rejected it when it was presented to him. In fact, they admitted they were “embarrassed” to discover they didn’t. The court determined Lovely never agreed to the new termination provision, either orally or in writing, and therefore it was “unlawful and unenforceable.” In addition, the lack of any notice of severance for what was essentially a two-year term of employment was contrary to employment standards minimums, which made the provision in the termination letter void, said the court.
The court also found Lovely had proceeded as if he believed the original contract he drafted was in effect – calling himself president of Prestige, among other things – and none of the company’s ownership did anything to contest it, which would have been expected had they believed the other contract was in effect. The company also tried to argue Lovely had induced the minority owner to sign his original contract and job description by saying it was only for his work permit, but the court didn’t find this likely, as Lovely’s representations were true – he intended it to be the employment contract and he needed it to secure work permit approval.
