Can’t have it both ways

Employer cannot rely on the terms of an employment contract it has refused to sign

Thelma Sawyer worked for Rab Energy Group Inc. continuously from November 1987 until she was terminated on June 3, 1999. Rab is in the business of fabricating and marketing windows. In 1999 the board of directors decided to terminate Ms. Sawyer when an agreement could not be reached with her as to salary and job position.

When Ms. Sawyer began in 1987, she was employed as the office manager responsible for accounting, office administration, personnel and the organization of the board and shareholder meetings. In April 1988 Ms. Sawyer was promoted to controller/office manager and reported directly to the board of directors. She also became the PVC window manager.

In April 1993 Ms. Sawyer entered into an employment contract with Rab. This was the first time she had an employment contract with Rab. The agreement was for a five-year term and contained a provision that permitted either party to terminate the agreement by giving the other three months’ written notice of termination. The termination clause also gave Rab the right to provide three months’ salary plus bonus to Ms. Sawyer in lieu of notice.

This original contract was for the position of secretary/treasurer, although it was not disputed that her job duties also included controller, office manager, finance and administration manager and human resources manager. After the employment contract terminated in 1998, the responsibilities of special projects manager was added to her job duties. In the absence of the general manager she assumed those duties.

In September 1997 a committee of the board of directors was struck to negotiate a new employment agreement with Ms. Sawyer. An agreement was reached in draft but was never signed or approved by the board of directors nor signed by Ms. Sawyer. The unsigned agreement increased her base salary from $4,000 to $5,833.33 per month. It contained the same termination clause as the original agreement.

In 1998 there was a change in the shareholders of Rab. As well Ms. Sawyer, who returned from a secondment, was not given her former position rather. She was given the title of special projects manager, and she now reported to the general manager and president David Borud.

In January 1999 the board of directors instructed Mr. Borud to clarify Ms. Sawyer’s position and salary. Mr. Borud sent Ms. Sawyer a memo outlining her salary and bonus. Her base monthly salary was set out as $4,210. The memo stated that all other items listed in the current contract were to remain in place on a month to month basis until further notice from the board of directors.

Ms. Sawyer refused to sign the memo. She wrote a letter to the board, advising them that she had accepted the new employment contract salary negotiated in September 1997. The only reason the contract had not been signed was she had been asked not to sign it until management contract negotiations were completed.

Meetings were held over the next few months and Ms. Sawyer was offered the position of chief financial officer. However the board was not prepared to adopt the remuneration negotiated in the unsigned September 1997 contract. She subsequently wrote to the board informing them that she would accept the position of chief financial officer at the salary negotiated in September 1997. If this was not acceptable, she preferred to stay in her position as special projects manager at her existing wage.

The board did not reply to Ms. Sawyer’s letter. Instead at a board meeting on May 25, 1999, it decided to terminate her employment, which was communicated to her on June 3, 1999. The termination letter stated that, because of the termination clause in her employment contract, she was only entitled to three months’ notice but that the board was providing her an additional two months’ salary. Ms. Sawyer refused to sign the letter. On July 12, 1999, she brought an action for wrongful dismissal in the Yukon Territory Supreme Court.

The issue before the Court was whether Rab was required to provide three months’ notice or reasonable notice to Ms. Sawyer on termination. Rab relied on the termination clause in the employment contract. The Court held that no employment contract was applicable. The original agreement had expired and Rab did not agree to the unsigned employment contract. Rab could not try to impose one part of the unsigned agreement, the termination clause, while rejecting the other, the salary provisions.

The Court found that no written contract was in place at the time of her termination so Ms. Sawyer was entitled to reasonable notice of 11 months.

For more information:

Sawyer v. Rab Energy Group Inc., 2001 YKSC 537.

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