Dismissed worker argued termination provision wasn’t clear on exact severance entitlement, but it gave worker more than legal minimum
A British Columbia company’s termination provision wasn’t ambiguous because it stated statutory minimums were the floor for severance payments and provided for a greater entitlement than the minimums anyway, the B.C. Supreme Court has ruled.
Glenn Johnson, 60, was a software sales manager for IBM Canada based in Burnaby, B.C. He was hired in 2007 with duties managing three salespeople who sold, arranged financing for, and serviced IBM products. He was also responsible for customer satisfaction, territory management, and controlling business objectives.
Johnson’s employment with IBM was governed by a written employment agreement that included a termination provision that stated if he was terminated without cause, “IBM will provide you with a separation allowance in lieu of notice equal to the greater of IBM’s current separation practice (i.e. one week’s notice/salary for every fully completed six months of service up to 52 weeks’ salary) or three months of your annual salary.” The clause went on to state that it included all statutory obligations and would not “be less than the minimum statutory termination pay and severance pay requirements.”
On Nov. 1, 2017, Johnson’s manager informed him that his role was being eliminated. If he couldn’t find another role with IBM within 30 days, his employment would be terminated. Johnson was unsuccessful in finding anything else with the company, so on Dec. 5 IBM gave him notice of termination without cause due to a staff reduction initiative, effective Feb. 6, 2018, with his benefits continuing until that date. The company also offered six months of career transition and counselling services, but Johnson opted out.
IBM provided one week of working notice and paid him severance equal to 29 weeks’ salary plus incentive pay — IBM’s incentive plan stipulated that in case of termination of employment, the employee received incentive based on business results as of the last day of the last full month of employment, in this case Nov. 30, 2017. The total payout to Johnson was $101,288.30.
Johnson filed a wrongful dismissal complaint, arguing the termination provision in his employment agreement was ambiguous and unenforceable because it didn’t address all compensation payable under the B.C. Employment Standards Act. He pointed out that IBM actually paid more than what the termination clause required, which he argued demonstrated the clause’s ambiguity.
The court noted that under the act, employers are obligated to pay terminated employees with three or more years of service three weeks’ wages plus one additional week for each additional year of employment, up to a maximum of eight weeks’ wages, or a combination of written notice and wages equalling that total. The act defines wages as salaries, commissions, and incentives related “to hours of work, production or efficiency.”
The court commented that IBM’s employment agreement was “not a masterpiece of drafting” but it was not ambiguous. The termination provision stated that the severance allowance was not to be less than the minimum statutory termination pay and severance pay requirements, which established the statutory minimum as “a floor for severance.” The amount provided for in the clause was greater than the minimums and sufficient to avoid a common law reasonable notice entitlement, said the court.
“In this case, the statutory minimum is eight weeks’ wages. Under the employment agreement, Mr. Johnson is entitled to 21 weeks,” the court said. “IBM Canada understood that 21 weeks severance is what arises from the agreement but in this case used 29 weeks to calculate severance.”
The court also found that the ending of eligibility for the incentive plan was reasonable, as Johnson’s entitlement was more than covered by the amounts allowed for in the termination clause. Given that the severance paid to Johnson was greater than his entitlement using his average weekly wages anyway, the details of the calculation weren’t necessary to delve into — and the overpayment couldn’t be used as proof of ambiguity, said the court.
The court found that had the termination clause been unenforceable, Johnson would have been entitled to 12 months’ notice. However, the court dismissed Johnson’s wrongful dismissal claim.
For more information see:
• Johnson v. IBM Canada Ltd., 2019 BCSC 592 (B.C. S.C.).
