No signature, no contract

Kosabeck v. Vision Pay Inc., 2004 CarswellAlta 1820, 2004 ABPC 249 (Alta. Prov. Ct.)

An Alberta court has ruled there was no contract of employment between a self-employed software consultant and a company.

Terry Kosabeck was hired by Vision Pay Inc. in August 2001 and was paid $40 per hour. On Jan. 1, 2003, Kosabeck’s role was expanded and he and the chief executive officer put together a draft agreement.

It provided a salary of $60,000 per year, was open to renegotiation on a quarterly basis until Dec. 31, 2003, and contained a provision that any change in the contract would have a 90-day change period in effect. Though it was never finalized and never signed, Kosabeck was paid as per its conditions. Starting in January he was paid a flat rate of $2,500 twice per month, and there were no deductions.

In November Vision Pay hired a new CEO who decided Kosabeck did not fit into the company’s plans. She told him in the future he would be paid $45 per hour and would need to get specific authority for all the work he billed for. Kosabeck was given the first December payment but nothing afterward. There was no notification of termination of contract, and no severance payment.

Kosabeck filed an action seeking $1,333 for pay between Dec. 16 and the date of his termination one week later; and $15,000 for three months’ pay based on the cancellation provision in the draft contract.

Kosabeck produced a letter from the former CEO with whom he had negotiated the draft contract. It said the agreement was the basis upon which Kosabeck had been working and there had been a meeting of the minds relative to all terms of the agreement.

The Alberta Provincial Court disagreed. It said there had not been a concluded contract between Kosabeck and Vision. It had not been signed, its conditions were never fulfilled and both Kosabeck and the CEO knew it could not be entered into without the authority of the president.

In the absence of a specific contract — the court ruled Kosabeck was clearly an independent contractor, so there was no implied contract of employment between the parties – the court had to determine the arrangement between them.

It said there was no expressed or implied contract that Kosabeck would be paid to Dec. 31, 2003, but there was an implied agreement to give sufficient notice so either party would have time to organize a smooth transition should notice ever be given. The court also concluded that Kosabeck’s contract for consulting services in effect became a periodic contract on a half-monthly basis. Since he worked until Dec. 23 he should be paid to the end of the service period in which Dec. 23 fell.

Kosabeck was awarded $2,675. He was not entitled to pay in lieu of notice. Even if the draft agreement was valid, its 90-day notice provision would only operate within the one year which ended on Dec. 30, ruled the court.

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