Court of Appeal for Ontario

Date: April 24, 2017 Docket: C61944

Justices: Sharpe, Lauwers and Miller JJ.A.

Parties

Between

Bill Roberts Plaintiff (Respondent)

and

Zoomermedia Limited Defendant (Appellant)

Counsel

Todd Weisberg, for the appellant James Renihan, for the respondent

Heard: December 22, 2016

On appeal from: The judgment of Justice Paul M. Perell of the Superior Court of Justice, dated March 4, 2016, with reasons reported at 2016 ONSC 1567.

Decision

B.W. Miller J.A.:

Background and Decision Below

[1] The respondent was employed as President and CEO of the appellant's television division. The terms of employment were set out in a fixed term contract dated November 1, 2007 and amended June 11, 2009 (the "Employment Agreement"). The Employment Agreement provided that on the expiry of the fixed term on October 31, 2011, the respondent would be entitled to a lump sum severance payment, equivalent to two year's salary, as well as a 6-month paid sabbatical to be arranged by the appellant and begin on November 1, 2011 or another mutually agreed date.

[2] There were frequent attempts to renegotiate the Employment Agreement, particularly as its expiry drew near. The motion judge found that the parties were not able to come to an agreement, and that the Employment Agreement was never amended after June 11, 2009. On October 31, 2011, the Employment Agreement expired. That was not the end of the respondent's employment with the appellant, however, which continued after this date as a common law employment relationship. The respondent carried on with his duties, and the parties carried on negotiating towards a new written contract.

[3] The parties did not make arrangements for the respondent's sabbatical. Over the course of the post-expiry negotiations, the appellant refused to make the severance payment, and took the position that the respondent had waived his entitlement to a sabbatical. The respondent disagreed. Eventually, the respondent advised the appellant that he would commence legal proceedings by January 20, 2012 if his claim for severance and the sabbatical were not resolved.

[4] Negotiations broke down. On March 1, 2012, the appellant gave notice that it was terminating the respondent's employment, effective October 31, 2012. The respondent was given 8-months working notice, and a 2-month severance package. The appellant took the position that the respondent was not entitled to the 2-year severance payment or the sabbatical provided under the Employment Agreement. The respondent brought an action for breach of contract.

[5] The respondent was granted summary judgment for breach of the Employment Agreement. The motion judge found the appellant liable to pay the respondent damages for the 2-year severance payment ($490,000) and for payment in lieu of the sabbatical ($150,000).

Issues on Appeal

[6] Although the appellant raised several grounds of appeal, only two were pursued in oral argument. The appellant argues that the motion judge erred in failing to find that: (1) the respondent had waived his entitlement to a sabbatical under the Employment Agreement; and (2) the severance provision of the Employment Agreement was invalid.

Issue 1: Waiver of the Sabbatical

[7] The appellant argues that the motion judge erred in not finding that the respondent waived his entitlement to a sabbatical. The argument, which was rejected by the motion judge, is that over the course of the pre-expiration negotiations to extend the Employment Agreement, the parties reached an agreement that the respondent would forego his entitlement to the sabbatical. Once this resolution was achieved, the appellant says, the sabbatical dropped off the agenda and the parties focussed on other terms, such as salary and the 2-year severance payment. The sabbatical entitlement no longer featured in memoranda or draft agreements. This is evidence, the appellant argues, that the question of the sabbatical had been settled definitively: the respondent waived it in consideration of other benefits, such as an increase in salary. This waiver of the sabbatical exists independently, the appellant argues, of the failed negotiations for a new employment contract.

[8] The motion judge rejected this argument, and made no error in doing so. He found, on the evidence before him, that the parties did not come to an agreement. The respondent may have been willing, in the course of negotiations towards a new employment contract, to forego the sabbatical. But the appellant cannot convert a provisional bargaining position into a valid waiver.

[9] The appellant further argues that the motion judge erred in finding that the appellant breached the sabbatical obligation. The contractual obligation was for the appellant "to facilitate a six-month sabbatical … through Massey College (or similar mutually acceptable institution)". The appellant argues that there was no breach, as the respondent never made any arrangements with the appellant to take the sabbatical.

[10] The motion judge made no error in finding the appellant to be in breach of this obligation. On the expiry of the Employment Agreement, the appellant took the position that the respondent had waived his entitlement to a sabbatical. The appellant was abundantly clear that it refused to fund or otherwise facilitate a sabbatical to which, it believed, the respondent was not entitled. In the face of such a refusal, it would be pointless to require the respondent to tender a logistical proposal as to how and where he would spend the sabbatical.

[11] The motion judge made no error in awarding damages for this breach.

Issue 2: Invalidity of the Severance Provision

[12] The appellant's second ground of appeal is that the motion judge erred by not giving effect to the argument that the termination clause of the Employment Agreement, which contains within it the severance provision, contravenes s. 61(1) of the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "ESA"), and is therefore void. The appellant's argument is that s. 9.2 of the Employment Agreement, which provides entitlements in the event of early termination without cause, is void because it contravenes s. 61(1) of the ESA by expressly excluding entitlement to short-term and long-term disability benefits during the statutory notice period. Furthermore, the appellant argues, the invalidity of s. 9.2 entails that article 9 must be invalid in its entirety, including s. 9.1, which is the source of the appellant's entitlement to the contractual 2-year severance payment.

[13] The relevant sections of the Employment Agreement are as follows:

8. Termination

8.1 Notice

The Executive's employment may be terminated prior to the end of the term at any time:

(c) by the Company, for any reason other than Just Cause ("Termination Without Cause"), at any time without prior notice and without further obligation to the Executive other than those obligations of the Company pursuant to section 9;

9. Rights of the Executive on Termination and Lump Sum Payment

9.1 Where the Executive's employment under this Agreement has been terminated under section 8.1(c), or upon the expiration of the Term, the Executive shall be entitled to receive from the Company, in addition to accrued but unpaid Salary and bonus, including bonus remuneration, if any, and any entitlement in respect of vacation as contemplated by section 7, a lump sum payment equivalent to two (2) years' Salary, less statutorily required deductions (the "Severance Payment"). The Severance Payment shall be paid by the Company to the Executive within 30 days after the effective date of termination, or by such other arrangement as may be mutually agreed upon and shall be in full satisfaction of any and all entitlements that the Executive may have to notice of termination or payment in lieu of such notice, severance pay, and any other payments to which the Executive may otherwise be entitled pursuant to any applicable law.

9.2 Where the Executive's employment under this Agreement has been terminated under section 8.1(c), the Executive shall continue to receive the Benefits described in paragraph 1 of Schedule A, other than Long Term and Short Term Disability until October 31, 2011 or until the expiry of two (2) years after the effective date of termination, whichever is first, or such later date as may be required by the relevant legislation. Notwithstanding the foregoing, the Executive shall notify the Company if similar benefits are sourced from an alternative provider during that period, at which time the Company's obligation to continue the Benefits shall cease. On termination for any other reason, all Benefits shall cease at the effective date of termination or such later date as may be required by the relevant legislation.

[Emphasis added.]

[14] There is an important asymmetry between sections 9.1 and 9.2 as a result of the June 11, 2009 amendment. Section 9.2, the impugned provision, applies only when employment is terminated by the employer in accordance with s. 8.1(c). That is, it only applies in the event of a termination by the employer, without cause, prior to the end of the term of the Employment Agreement. Although section 9.1 originally had the same precondition, it was amended in 2009. The result of the amendment was that the entitlement to the severance payment would no longer be conditional on early termination, but would be provided automatically at the end of the term of the Employment Agreement.

[15] The respondent argues that because the Employment Agreement was not terminated by the appellant prior to the end of term, s. 9.2 has no application to the dispute between the parties, and the court need not address whether it infringes the ESA. The appellant argues, however, that if s. 9.2 is void, than the entirety of article 9 must be void as well, relieving the appellant of its obligation to pay the severance payment.

[16] I agree with the respondent. Whether s. 9.2 infringes the ESA is irrelevant to this action, and there is no need for this court to address that question. Effectively, the appellant argues that because it did not agree to provide the respondent with all of his statutory entitlements – entitlements that were conditional on an early termination, an event which never occurred – the respondent must therefore forfeit his contractual entitlements: contractual entitlements that are far greater than what either the ESA or the common law would have provided. This would be a perverse application of a statute that is intended to protect the interests of employees, and I would reject it.

Disposition

[17] I would dismiss the appeal and award costs to the respondent in the amount of $9,000 inclusive of disbursements and HST.

Released: April 24, 2017

"B.W. Miller J.A."

"I agree. Robert Sharpe J.A."

"I agree. P. Lauwers J.A."