No contract provision for termination

Terminated contract employee entitled to payment of the contract balance

On Sept. 13, 1999, Win Wachsmann commenced employment as the development director with the Valley Christian School Society. His employment was for a one-year term as outlined in his letter of employment. The letter indicated that it was not a formal contract but a continuing appointment with a built-in formal review at the end of the first year of service.

On July 5, 2000, the school principal reported to the society’s board of directors that Mr. Wachsmann had fulfilled his responsibilities satisfactorily and recommended that he be given a second one-year contract. The board approved this recommendation on Aug. 28 and Mr. Wachsmann was so informed.

On Sept. 29 the school librarian filed a sexual harassment complaint against Mr. Wachsmann. He was suspended with pay and reinstated by the board of directors on Oct. 17 on certain conditions. At the time of his reinstatement he was informed by letter that the board had determined not to renew his contract at the end of the current contract year.

During this time, the school was experiencing some financial difficulties. On Sept. 27 Mr. Wachsmann and all staff members were informed that their salaries would be reduced by 10 per cent. Mr. Wachsmann was also told that his position would be reduced from full-time to four days a week and his pay would be reduced by a further 20 per cent. The result was a decline of $525 per paycheque.

Having received legal advice that the 10 per cent reduction in salary was in breach of each employee’s contract of service, the board on Dec. 15 restored the 10 per cent rollback to each employee including Mr. Wachsmann. It invited each employee to forgo the money deducted as a donation. The net result to Mr. Wachsmann’s paycheque was a decrease by $425 per month from the contract amount.

Mr. Wachsmann had hoped that the financial situation would improve. However, having heard nothing by February 2001, he wrote to the chairman of the board on Feb. 9 asking that his salary be restored in full, that he be paid in full for the 20 per cent reduction and that the 10 per cent reduction from Oct. 1 to Dec. 15, 2000, be repaid.

The board responded with two letters. The first letter terminated Mr. Wachsmann’s employment on the grounds that the school could no longer afford to pay him. He was given two week’s notice of the termination. The second letter informed him that he would not be reimbursed retroactively for the full-time work as his position had been reduced to a part-time position so no money was owed.

Mr. Wachsmann brought an action seeking payment of his salary to the end of his contract year and reimbursement of his previous reductions to his salary.

Generally speaking, when an employee with a fixed-term contract is dismissed without cause, the employee is entitled to recover damages for loss of income for the balance of the contract subject to mitigation. In this case there was no clause in the letter of employment that rebutted this position. As such Mr. Wachsmann was entitled to $27,625 as the amount due from March 1 to Sept. 13, 2001.

With respect to the reduction in hours and salary by 20 per cent, the school argued that Mr. Wachsmann acquiesced and accepted this change. The Court did not agree with this position. The fact that he continued to work after the reduction in hours and salary did not constitute acceptance. The Court found that waiting a reasonable period of time (nine weeks) before raising the issue did not amount to acceptance or acquiescence. Therefore Mr. Wachsmann was entitled to recover the 20 per cent of his pay that was unilaterally withheld from Oct. 1, 2000 to Feb. 28, 2001.

With respect to the 10 per cent rollback the Court held that Mr. Wachsmann was not entitled to be reimbursed this money for the Oct. 1 to Dec. 15 period. When the school indicated that it had reversed its policy with regards to the 10 per cent rollback, Mr. Wachsmann responded to an inter-office memo by stating that “I am asking for a return to my full paycheque (without retroactive pay to the beginning of October).” The Court held that the school was entitled to rely on Mr. Wachsmann’s note to refuse to pay the 10 per cent rollback retroactively.

In summary Mr. Wachsmann was awarded $27,625 in damages for breach of contract and $4,250 as reimbursement of 20 per cent of pay withheld.

For more information:

Wachsmann v. Valley Christian School Society, 2001 BCSC 1789.

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