Workers believed repayment obligation in employment contract was null and void when employer laid them off
A Saskatchewan employer did not breach a three-year employment agreement by laying off four foreign workers without a definite date of recall, the Saskatchewan Provincial Court has ruled.
Doepker Industries, a machinery manufacturer in Annaheim, Sask., decided in 2005 to recruit welders from South Africa. The company sent two recruiters and pre-screened applicants through an employment agency. Doepker had to pay $3,500 to the agency for each applicant.
Doepker hired 20 new employees from South Africa and required them to sign a pre-employment contract and loan agreement. The loan agreement stipulated Doepker would loan the new hires money to pay for transport to Canada for their families and also included the fee it paid to the employment agency in South Africa. The loans would be repaid through a monthly forgiveness of the debt over a three-year period. For each month the new employees worked for Doepker, the company forgave one-thirty-sixth of the loan obligation. If an employee resigned before three years elapsed, then the remaining balance would be due immediately.
In the fall of 2008, Doepker began experiencing financial problems. The company determined it would have to lay off some people. Four South African employees were the most junior at the time and were given layoff notices on Dec. 9, 2008. The notices said Doepker expected things to improve over the next six months and it could bring them back.
Just three days later, on Dec. 12, the company received an unexpected increase in product orders and rescinded the layoff notices. However, the four employees couldn’t get a guarantee of job stability and security so they went to work for another company.
Doepker indicated to each of the four workers that if they were resigning then the balance of their loans was due. However, the workers felt they were not responsible to pay back the money under the loan agreement because of anticipatory breach of the employment contract. They argued Doepker could not guarantee their employment to the end of the three-year period and thus wasn’t able to fulfil its contractual obligation, which freed them of their obligations.
The court found the agreement did not contain any suggestion that the employees were guaranteed continuous employment during the three years. Each employee had acknowledged he would remain employed with Doepker for three years, but that was different than Deopker guaranteeing continuous employment, said the court.
The court also found there was no reason to conclude Doepker could not carry out the contract. The company indicated it expected the workers would be brought back within six months and, in fact, it rescinded the layoff after three days. The workers were motivated by future job security rather than Doepker’s ability to fulfil the employment contract, said the court.
“It was certainly the prerogative of each (employee) to seek what they perceived to be more stable and lucrative employment,” said the court. “However, in so doing, they triggered their obligation to Doepker to repay that portion of their indebtedness which had not been forgiven to their date of resignation.”
