Real estate agent evicted from contract

Employer exercised termination clause in contract after agent said she'd be leaving when it expired

This instalment of You Make the Call features a real estate agent who was terminated after she gave notice she was leaving at the end of her contract.

Elenita De Castro was a real estate agent for Re/Max Executive Realty in Toronto when the owner, Vess Ivanov, hired her to join a special team of agents who acted as buyer agents for prospective purchasers. At this time, she effectively worked for both Re/Max and Ivanov personally.

De Castro signed a six-month contract with Ivanov in May 2002 which allowed either party to terminate with two weeks’ written notice. Ivanov was also permitted to terminate the contract immediately with cause, which was outlined as failing to perform her duties, fraud, dishonesty, gross negligence or “similar conduct.”

When the first contract expired, De Castro and Ivanov agreed on a new 12-month contract with similar provisions. The contract included a compensation schedule that stipulated De Castro would receive a team profit-sharing bonus and a $6,000 retaining bonus after 12 months, if she was still working for Ivanov at that time.

In the fall of 2003, De Castro began negotiating with Ivanov for a new contract as a managing partner. However, on Oct. 2, 2003, De Castro told Ivanov she would be leaving his team of agents at the end of her contract, which was Nov. 10.

Nine days after De Castro gave notice of her departure, on Oct. 11, Ivanov gave her a written notice of termination, stating the contract would be terminated in two weeks’ time. The notice also gave her the option of staying another week until Oct. 31 and stated “I would be happy if you come back and work with us again soon.”

De Castro was upset at the notice of termination and didn’t expect it. She responded by indicating in what she called a “letter of resignation” that she would leave on Oct. 31. However, since this date was still 10 days before the completion of the 12-month contract period, she didn’t receive the bonuses. De Castro sued Ivanov for breach of contract, claiming he owed her both the profit-sharing bonus and retaining bonus.

You Make the Call

Was De Castro entitled to the bonuses?
Was Ivanov entitled to terminate the contract without paying the bonuses?

If you said De Castro was entitled to the bonuses, you’re right. The court found De Castro did not terminate the contract, but merely gave notice she would not be renewing it and intended to work out the remainder of the term. However, Ivanov’s notice did constitute a notice of termination of the contract.

In order for De Castro to miss out on the retaining bonus, the court said, she would have to have been terminated for just cause. Since Ivanov invoked the two-week termination notice rather than attempting to dismiss her immediately, he did not terminate her for just cause. She was also negotiating for the position of managing partner at the time and Ivanov’s letter said he would be happy to work with her again, an indication of her competency. Because she wasn’t terminated for cause, the court said the fact De Castro wasn’t working for Ivanov after the 12-month period was not her fault. As a result, she was entitled to the $6,000 retaining bonus and $500 profit sharing bonus.

The court also found Ivanov acted in bad faith by trying to avoid paying the bonuses by terminating the contract without a good reason. It ruled this was an independent cause of action warranting bad-faith damages of $500, giving a total award of $7,000.

“There is an implied contractual obligation of good faith in the contract of employment to treat the employee with good faith in terminating his contract,” the court said. “Mr. Ivanov clearly contravened this implied term, when he sought to deprive Ms. De Castro of her bonus by early termination, where he had no valid reason for doing so.” See De Castro v. Ivanov, 2008 CarswellOnt 8337 (Ont. S.C.J.).

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