A lesson in employment contracts

Employers, acting in good faith, don’t have to bend to unreasonable demands in contract negotiations

Employees should think twice about pushing the envelope when it comes to negotiating employment contracts, particularly if they’ve already resigned. That’s the clear message coming out of the Ontario Superior Court of Justice after a computer programmer, who was terminated after demanding eight weeks’ vacation during contract negotiations, sued unsuccessfully for wrongful dismissal in Kouznetchik v. Odeka Corp.

Vlad Kouznetchik was a self-taught computer programmer who immigrated to Canada from Russia at the age of 15. Shortly after he arrived in 1997, he took a position with Odeka, a small financial software manufacturer in Toronto. Paul Odette, the chairman of Odeka, hired the then 16-year-old Kouznetchik as a summer employee. The company decided to keep Kouznetchik on, offering him a starting salary of $27,000.

Between 1997 and 2000, he was given a number of raises. In July 2000, while earning a salary of $45,000, he tendered his resignation and gave two-weeks’ notice. He said he wanted to pursue other opportunities and was interested in going back to school. The resignation came as a surprise to Odeka, and they asked him to stay until the end of December because of the sheer volume of outstanding work Kouznetchick had on his plate. He agreed to stay and arranged a flexible-work schedule. He took a six-week unpaid leave in October to go to Russia. When he returned, he didn’t come back to Odeka full-time, working only three days per week with the company’s permission.

He also began reporting to Agnes Kazakos, Odeka’s vice-president. She said there weren’t any formal discussions about what would happen at the end of December with his employment, but told him that if he changed his mind about leaving, he should just let them know. Kouznetchick said they went to a coffee shop together in December to discuss his future with the company.

At the coffee shop, Kazakos told him they were looking for a manager and she thought he was the ideal candidate. That started a series of contract negotiations between Kouznetchick and Odette, who was responsible for the hiring. Because it was close to Christmas they decided to deal with the contract after the holiday. His employment was continued into January. The question before the court was whether or not they reached an agreement for a binding employment contract.

They met at the beginning of January, when Odette asked Kouznetchick to make a proposal. Kouznetchick was surprised because he thought the proposal would be coming from Odeka, and not vice-versa. He prepared his own proposal that included an increase to $40 an hour, which worked out to roughly $80,000 per year. Odette was not willing to offer that much but was prepared to give an increase. One figure proposed was $55,000 to start but Kouznetchick thought this wasn’t adequate.

Since Kouznetchick and the company couldn’t come to terms on the first contract, Odette went back to the drawing board. The two sat down and went over the contract point-by-point. A consensus was reached on salary: it would start at $65,000 and eventually hit $80,000. But there were unresolved issues: the length of annual vacations; Odeka’s policy of having employees sign confidentiality agreements; and its policy of having staff sign non-competition clauses.

The vacation issue was a particularly thorny one. Kouznetchick wanted eight weeks, including every other Friday, off. In her summary Justice Ellen MacDonald wrote the vacation he was looking for was an “unreasonable” amount.

“It is hard to conceive of circumstances where management of a small corporation could accede to such a demand,” she wrote.

On Feb. 16, 2001, Odette gave Kouznetchick the non-competition and confidentiality agreements. Odette told him to take them home and read them. Kouznetchick consulted with his lawyer and decided he should not sign either agreement. He considered them unreasonable because, if he left Odeka, he would be unable to work in a related area for two years. Odette told him they were standard and everyone in the company had signed similar agreements.

On March 1 they met again after Odette returned from holidays. Odette told Kouznetchick the agreements had been prepared by a lawyer whose opinion was that the agreements were unenforceable in any event. Odette told Kouznetchick he must sign the agreements and also enroll in the Canadian Securities Course as part of training for the new job. Kouznetchick didn’t sign the agreements, but went out at lunch and enrolled in the course. When he returned and presented a receipt to Odette expecting to be reimbursed for the cost of the course, Odette was upset and told Kouznetchick if he didn’t sign the agreements as they stood then the negotiations would be over. Kouznetchick said he was surprised by Odette’s position and volunteered to make amendments.

On March 6 everything came to a head. Kouznetchick presented his proposed amendments, leaving the vacation area blank. He said he left it blank for Odette to fill in and was certain they could reach an agreement on vacation time. Later that day Odette and Kazakos called him into the boardroom. They told him they had reviewed everything but could not work with him without the agreements as presented by them. Odeka was very firm in its position and the termination was effective immediately. He was given three-weeks’ pay in lieu of notice.

Kouznetchik charged he was unjustly terminated from his employment while Odeka maintained he had quit in the summer of 2000 and the company had merely extended his employment. The judge said three-weeks’ notice was not sufficient, given Kouznetchick’s highly specialized area of employment and length of service. She extended it to four months, or $15,000.

Justice MacDonald said Odeka was justified in dismissing Kouznetchick on March 6 because he refused to sign the non-competition and confidentiality agreements. But the vacation issue was the real deal breaker. She said in Odette’s view neither party was prepared to budge from their respective positions. Since she didn’t find any bad faith on the part of Odeka with any aspect of the negotiations, Kouznetchick’s claim must fail.

“It cannot be that an employer, acting in good faith, such as Odeka, can be compelled in law to bend to unreasonable demands on the part of a prospective employee,” Justice MacDonald wrote.

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