Employer demanded that a fired employee sign a release before giving termination pay
An Ontario company that apologized after withholding termination pay until a fired employee agreed to an enhanced severance offer, and then provided the proper amounts, still repudiated its employment contract, the Ontario Superior Court of Justice has ruled.
Candace Perretta was hired by Rand A Technology, a software company in Mississauga, Ont., as a customer advocate in 2014. Four years later, Rand promoted her to the position of sales representative.
The new position came with a new employment contract containing a termination provision allowing the company to terminate the woman’s employment without cause by providing two weeks’ notice or pay in lieu of notice, in addition to the minimum notice, benefits, and severance pay entitlement required by Ontario’s Employment Standards Act, 2000.
Perretta worked for the next 17 months until March 31, 2020, when Rand terminated her employment without cause. The company confirmed that it would pay her the statutory minimums, but in order to receive the extra two weeks’ pay in lieu of notice, the sales rep would have to accept, within seven days, an “enhanced severance” offer that included signing a “full and final release,” returning all company property, agreeing to be bound by the contract’s confidentiality and non-competition provisions, modifying her LinkedIn profile, and agreeing to repay the two weeks’ pay if she breached any of these terms.
Perretta indicated her reluctance to sign the release and Rand replied by once again demanding she agree to it in order to receive the extra pay. Perretta then had a lawyer contact Rand to say that the company’s treatment of her was in breach of the employment contract.
Rand’s legal counsel responded that it had been mistaken when it demanded Perretta accept the enhanced severance offer. The company apologized for demanding that she sign the release and immediately paid the full amount outlined in the employment contract — her statutory entitlement and the extra two weeks’ pay.
If there wasn’t additional liability for the repudiation, there would be no incentive for the employer to comply with the termination provision in the first place.
However, Perretta sued for wrongful dismissal, claiming that Rand repudiated the employment contract, which entitled her to common law reasonable notice.
The court noted that repudiation of a contract “occurs by the words or conduct of one party to a contract that show an intention not to be bound by the contract.” In addition, a party can repudiate a contract whether they intend to do so or not, because their actions are to be assessed objectively.
The court found that the provision for termination without cause required Rand to provide the statutory minimum entitlement to reasonable notice, plus an additional two weeks and any required severance pay. However, when Rand terminated Perretta’s employment, it refused to pay her the two weeks’ pay in lieu of notice without her agreeing to the enhanced severance offer and only consented to pay her the statutory minimum.
The court also found that the enhanced severance offer contained a number of significant demands, so it wasn’t a “casual slip.” The company apologized, but it “took time and purpose to prepare this detailed document.” In addition, Rand reiterated its demand when Perretta expressed her reluctance. A reasonable person would view Rand’s conduct as indicating that the company intended not to be bound by the employment contract, said the court.
The court also noted that Rand’s counsel apologized for demanding Perretta sign the release, but not for the other substantial terms in the enhanced severance offer. Even if the company didn’t understand its obligations under the contract until it received legal advice, its conduct still indicated an intention to not be bound by the contract, said the court.
In addition, simply apologizing and paying the amount required by the contract wasn’t enough. Rand’s conduct deprived Perretta of money to which she was entitled and had she not sought legal advice, the company likely would have gotten away with it. If there wasn’t additional liability for the repudiation, there would be no incentive for Rand to comply with the termination provision in the first place, said the court.
The court determined that Rand’s repudiation made the contract no longer valid, and also that Perretta was entitled to common law reasonable notice, which in her case was six months. Perretta’s salary, commission, and benefits over six months, minus the amount already paid by Rand, added up to $16,807. See Perretta v. Rand A Technology Corporation, 2021 ONSC 2111.