Sometimes a change in an employee’s duties or position results in such a fundamental shift in his or her relationship with the employer, such that a pre-existing employment agreement may no longer be enforceable. But that is not always the case and a recent decision of the BC Supreme Court is a good example of where incremental changes in an employment relationship do not oust a pre-existing agreement.
Mr. Wernicke had worked for Altrom Canada Corp. for 12 years. At the time of his dismissal, he was the company’s CFO and VP of Finances, although when he had started he had held the position of controller. Altrom conceded that Mr. Wernicke had been terminated without cause but relied on a written employment agreement signed by Mr. Wernicke when he was first hired which limited the severance to which Mr. Wernicke was entitled to 8 weeks. However, Mr. Wernicke took the position that his job had fundamentally changed since he signed the written employment agreement, such that the agreement no longer governed the amount of notice or severance to which he was entitled.
There was little doubt that Mr. Wernicke was a sophisticated employee. The Court heard evidence that Mr. Wernicke had negotiated the terms of the employment agreement with Altrom before commencing work, had not been under pressure to accept the terms of the agreement and had received legal advice with respect to the agreement before signing. During his employment with Altrom, Mr. Wernicke had even attended seminars about employment contracts, routinely drafted employment contracts and made offers of employment on behalf of Altrom.
The Court also heard evidence that Mr. Wernicke had understood that under the employment agreement’s “entire agreement” clause, any changes to the employment agreement had to be in writing and signed by both he and Altrom. During the course of Mr. Wernicke’s employment with Altrom, the employment agreement was in fact revised on more than one occasion with respect to Mr. Wernicke’s remuneration. These revisions were made in writing and were signed by both Mr. Wernicke and Altrom.
In finding that Mr. Wernicke was bound by the termination provisions in the employment agreement, the Court cited four reasons. First, Mr. Wernicke understood the termination provision in the agreement. He had had time to review the agreement and had sought legal advice before signing it. Second, the Court found that the change in Mr. Wernicke’s role, from controller to CFO, was not a fundamental change, either in the nature of what he was hired to do or in what in fact he had been doing. The Court held that there was no evidence of any intention by either party that the employment agreement be renegotiated when Mr. Wernicke became CFO.
Third, and perhaps most importantly, the Court found that the changes in Mr. Wernicke’s employment were incremental and predictable, and consistent with his expectations when he accepted employment. The changes were not “so dramatic or fundamental so as to erode or extinguish” the basic foundation of the employment agreement. Lastly, the Court noted that Mr. Wernicke had implicitly relied on terms of the employment agreement in respect of his claim for reimbursement of his yearly dues and other expenses. That reliance was found to be inconsistent with his argument that the foundation of the employment agreement had been extinguished.
The decision of the Court is under appeal.
Again, this case is a good example of circumstances where there was not such a fundamental change in the relationship that the written agreement could no longer be enforced. However, this is not always the case and it is important to have your employment agreements reviewed when a promotion or change of role is contemplated. That way, you can ensure there is always an enforceable employment agreement in place.