Trial Win: Employers, Follow Your Employment Contracts to a Tee

Perretta v. Rand A Technology Corporation

The employment law team at Samfiru Tumarkin LLP successfully secured full severance pay for their client in the case of Perretta v. Rand A Technology Corporation, a matter that was argued at the Ontario Superior Court of Justice.

The defendant, Rand A Technology Corporation (Rand A), argued that Ms. Perretta was only entitled to the amounts set out under her employment agreement, which was her minimum entitlements under the Employment Standards Act (ESA) at 10.5 weeks plus two weeks’ compensation.

The court found that:

1. Rand A refused to acknowledge the client’s employment agreement by its conduct; and
2. The termination provisions in the employment agreement attempted to contract out of the ESA.

The court disagreed with Rand A and awarded Ms. Perretta her full common law notice entitlements for a six month severance package.

Overview of the Case

When Ms. Perretta’s employment was terminated in the early days of the COVID-19 pandemic, Rand A relied on its without cause termination clause which read:

“We may terminate your employment in our sole discretion, without cause, by providing you with two weeks of notice or pay in lieu of notice (or some combination thereof), plus the minimum notice or pay in lieu of notice (or some combination thereof) and severance pay (if any) then required by the ESA. Rand will also continue your Benefits to the extent and for the minimum period required by the ESA.”

However, rather than provide Ms. Perretta with these amounts guaranteed under her employment contract, Rand A refused to pay out the additional two weeks’ pay unless she signed a full and final release that included a number of provisions that benefitted the employer. These benefits included non-disparagement and confidentiality requirements.

The company gave our client an arbitrary deadline by which she had to accept in order to receive the additional two weeks’ pay.

Prior to retaining an employment lawyer with Samfiru Tumarkin LLP, Ms. Perretta attempted to negotiate a more favourable severance package herself. Her attempt was not only refused by her employer, but Rand A reiterated that if she didn’t provide the signed release by the deadline, the offer for the additional two weeks would be rescinded.

Ms. Perretta refused to sign the Release by the Defendant’s deadline, resulting in the offer of the “additional” two (2) weeks being revoked.

Ms. Perretta then contacted our firm and argued that Rand A had breached its own termination clause, effectively canceling the employment contract.  At this time, the employer claimed that their position was a mistake, and proceeded to pay out the minimum amounts owing under her employment contract, but refused to provide her with full severance pay. Full severance pay, or common law severance, is calculated through numerous factors, including age, position, and length of employment.

The Court’s Findings

The court concluded that in preparing the release and holding the amounts our client was guaranteed hostage, Rand A’s conduct was too deliberate to be a mistake. The company’s conduct demonstrated an intention not to be bound by the contract in place.

Keeping the framework from existing case law front of mind, the Court concluded:

“… if the only consequence to Rand for its imposition of new demands at the time of termination that deprived its employee of the benefit of the contract is to apologize and pay the amount that it was lawfully required to pay, there would be little or no incentive to comply with its termination provision.”

The court also went on to provide a detailed analysis of a section of the employment contract covering termination with cause. That clause read:

“We may terminate your employment for just cause at any time without notice, pay in lieu of notice, severance pay, or other liability, subject to the ESA. For the purposes of this Agreement, “just cause” means just cause as that term is understood under the common law and includes, but is not limited to: [list of Eleven Categories of Just Cause]”

In line with recent Court of Appeal decisions, Ontario Superior Court concluded that the above clause is unenforceable.  Specifically, the court agreed with our firm that the “subject to the ESA” language along with other clauses throughout the contract could not remedy the fact that the company claimed to have the authority to terminate Ms. Perretta’s employment without providing her notice or severance pay for conduct that falls well short of the ESA’s standard of “wilful neglect or misconduct”.

This language means that Rand A did not comply with the ESA from the outset and therefore it can’t now rely on the ESA to avoid its severance pay obligations to Ms. Perretta. Even if the contract had not been repudiated by the employer, the termination provision would not have been enforced.

Takeaways for Terminated Employees

Don’t sign that release!

Just because your employer is asking you to sign a release in order to receive severance pay, that does not mean you are required to do so. Given the power imbalance that exists between employees and employers, the very fact that your employer is demanding a release may mean that you are entitled to more than your employment contract suggests.

Regardless of whether you have been terminated with or without cause, language not relied on by your employer can render an entire termination clause unenforceable, which means you could be entitled to additional severance.

Before you sign anything, contact Samfiru Tumarkin LLP for a consultation to find out whether your employer is complying with the law.

Takeaways for Employers

Have your contracts reviewed

Contract review and updates may be required. If your termination clause is similar to that used by Rand A, you cannot rely on it to remedy an inconsistency with the ESA that exists at the time the contract was executed.

Do not overreach!

Make sure you comply with your termination provisions to the letter and, if your provision does not require delivery of a release for amounts in excess of the ESA minimums, do not ask for one unless you are offering something truly gratuitous in return. The reality is that termination clauses are becoming increasingly difficult to enforce. If you want to limit the amount of severance you owe to terminated employees, diligence and an attention to detail is an absolute necessity.

Read the Ontario Superior Court decision for Perretta v. Rand A Technology Corporation