Travel agency can’t use handbook, pandemic to limit severance: BC court

Verigen v. Ensemble Travel Ltd.

The impact of the COVID-19 pandemic on businesses and the decision of those businesses to terminate employees as a result of the pandemic was the focus of the recent British Columbia Supreme Court (BCSC) decision of Verigen v. Ensemble Travel Ltd.

Justice Milman found that the employer wrongfully fired the employee in question, who was awarded 5 months’ pay as severance.

Facts

Here are the facts as heard by the BCSC:

• The defendant, Ensemble Travel Ltd., is an international travel agency cooperative.
• The plaintiff, Ms. Verigen, started working for Ensemble in February 2019 as a business development director.
• Verigen was temporarily laid off in March of 2020 as a result of the impacts of the COVID-19 pandemic on the travel industry.
• Ensemble extended the layoffs a number of times and with each extension, provided a renewed anticipated return to work date.
• Verigen’s employment was subsequently terminated on August 24, 2020.
• Ensemble only paid Verigen her minimum severance, which was two weeks’ pay. The company relied on a termination clause contained in an employee handbook. This handbook had been provided to Verigen after she originally signed her employment agreement.
• Ensemble said that her employment with the company had been frustrated by the COVID-19 pandemic, making it impossible to keep her employed.
• Verigen filed a claim for wrongful dismissal, arguing that she was owed nine month’s pay in severance. She also felt that she had been fired when she was laid off in March 2020.

Court’s Analysis and Decision

In arriving at its decision to award Verigen compensation for her wrongful dismissal, the BCSC was faced with numerous issues.

Limiting severance through a policy handbook: Justice Milman found that Verigen was not limited to receiving minimum severance pay as per government legislation. The termination clause that tried to restrict her severance was contained in a handbook that was not provided to her at the time she signed her employment agreement.

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• Severance pay for travel agents

Frustration of contract due to the pandemic: The court based its decision to award severance to Verigen on the fact that Ensemble remained partially operational during the pandemic. Justice Milman specifically noted that the pandemic did not completely nor permanently remove the consumer demand driving the business of Ensemble. Accordingly, it was not impossible to continue Verigen’s employment. Rather, Ensemble made the decision to fire Verigen out of a desire to cut costs to assist with weathering the pandemic. While permitted, this does not absolve the requirement to provide appropriate notice of termination or payment in lieu thereof.

Layoff notices to employees and extensions: Justice Milman found that there is no constructive dismissal where the employee has agreed to the initial layoff and any subsequent extensions unless there is evidence the agreement was obtained in bad faith.

Lessons for Employees

• Employment agreements and handbooks aren’t always enforceable: This decision highlights the fact that just because your contract or employee handbook contains a termination clause, it doesn’t mean that it is legally binding. If your employer fires you and tries to rely on a clause contained in a document that was not provided to you when you signed your employment contract, you should speak with an experienced employment lawyer at Samfiru Tumarkin LLP to learn what your options are.
• Don’t accept a temporary layoff that you are opposed to: Agreeing to a layoff may permit your employer to place you on additional ones in the future without seeking your approval. You may also lose your opportunity to obtain a severance package through a constructive dismissal claim with help from an employment lawyer.
• It is difficult for an employer to argue frustration of contract: The COVID-19 pandemic does not give an employer carte blanche to fire employees with providing proper compensation. Frustration of contract is only present in very limited circumstances.

Lessons for Employers

• Tackle termination clauses properly: Ensure that any clauses addressing limitations on employee severance packages are contained in employee agreements – not in a separate policy, like a handbook – provided before or at the beginning of someone’s employment. Further, any subsequent changes to employment terms should be accompanied by benefit or bonus for the employee in exchange for their acceptance.
• The pandemic does not give you cover to fire employees without pay appropriate severance: the obligation to provide an employee with fair notice of termination or severance pay has not changed as a result of the pandemic, especially where the employer has maintained some operations.