Employer found to have acted in bad faith

Transfer of a business from one employer to another did not extinguish the first employer’s obligations

Mary Danaher was employed for 13 years and 7 months with Colonial Inns Ltd., first as a waitress and later as restaurant supervisor.

In December 1999 Colonial Inns entered into negotiations to sell its restaurant to Moon Palace (2000) Ltd. An oral agreement was reached whereby Moon Palace would lease the restaurant premises from Colonial Inns for five years and operate a Chinese restaurant. A condition of the sale was the retention of Colonial Inns’ restaurant employees, including Ms. Danaher.

From December 1999 to June 2000, Ms. Danaher worked for Moon Palace. On June 4, 2000, she was dismissed from her employment with Moon Palace and received severance pay in the amount of $920. Ms. Danaher brought an action for wrongful dismissal against Moon Palace and Colonial Inns.

Ms. Danaher had first learned of the proposed sale of Colonial Inns through the “grapevine” in mid-November 1999. There was no official meeting to let the restaurant staff know about the proposed change which took effect on Dec. 4, 1999.

In early December 1999 Ms. Danaher received a record of employment from Colonial Inns which indicated that her last day worked was Nov. 30, 1999. The reason for the termination of employment given was “business closed.” She received no severance pay from Colonial Inns.

When her employment changed to Moon Palace, her wages were cut back to the minimum hourly wage and her hours were considerably reduced. She was no longer given the responsibility of hiring staff. It was evident that she no longer had a supervisory position. Her hours of work decreased to the point that by May 2000 she was down from 40 hours per week to 12 hours per week.

Ms. Danaher discussed her concerns about the reduced hours with her former boss at Colonial, Roland Buckley, when he went to the restaurant for his meals. Mr. Buckley told her that a lease would not be signed with Moon Palace until his former staff was happy. The lease ultimately was signed in late May or early June 2000. There had been a six-month “testing period” before the lease was signed.

On May 7, 2000, she wrote to her new employer to advise them of her unhappiness with her reduced wage, her reduced hours and the harassment she encountered from her new boss, Henry Yang. A copy of the letter was provided to Mr. Buckley.

On June 6, 2000, Ms. Danaher was called into a meeting with Mr. Yang. At that time her employment was terminated and she was given another record of employment. The reason given for the termination of employment was “not suitable for position.”

In the Court’s view, it was the termination of Ms. Danaher’s employment by Colonial Inns in November 1999 that was relevant to this case.

The Court found that Ms. Danaher did not surrender her right to enforce Colonial Inns’ obligations to her as an employee from April 1986 to November 1999 or that she accepted the transfer of such obligations to Moon Palace.

There was no novation in this case. A novation is a trilateral agreement by which an existing contract is extinguished and a new contract brought into being in its place. In order to find novation in this case, there had to be assent by Ms. Danaher to the discharge of her previous employer’s obligation to give her reasonable notice of the termination of her employment.

Merely informing her of the change of her employment was not sufficient for a finding of novation. Ms. Danaher did not assent to the discharge of Colonial Inns’ obligation to give her reasonable notice of the termination of her employment.

The acceptance by Ms. Danaher of employment with Moon Palace was not fatal to her claim against Colonial Inns because her employment with Moon Palace did not continue beyond the notice period to which she was entitled from Colonial Inns.

The Court held that Ms. Danaher was entitled to 12 months’ salary in lieu of notice from Colonial Inns. The Court awarded an additional four months’ salary because of the bad-faith conduct of Colonial Inns. Mr. Buckley told Ms. Danaher that he would not sign the lease with Moon Palace until the employees were happy. In spite of this verbal reassurance, Mr. Buckley did sign the lease knowing of the concerns of the employees, particularly Ms. Danaher.

The six months’ earnings Ms. Danaher received from Moon Palace reduced the award of 16 months.

For more information:

Danaher v. Moon Palace (2000) Ltd., 2002 NBQB 86.

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