Author: Howard Levitt
Publication: National Post
Darrell Wronko had a great employment contract – two years of guaranteed severance if he was fired. But his boss, the new president of Western Inventory Service Ltd., wasn’t thrilled with this “sweetheart deal.” But the president’s attempt to change the deal backfired. Not only did he fail to reduce the severance in the contract, Wronko walked away with the full two years.
Wronko started with Western, a Toronto-based inventory service provider, straight out of school. Seventeen years later, he had worked himself up to vice-president. At the time of his promotion, he negotiated a contract entitling him to two years severance if he was terminated.
When Western’s new president took over, he sent Wronko a new contract by inter-office mail with a yellow sticky note asking him to sign. This contract only provided for seven months of severance. Wronko refused to sign.
The president then wrote Wronko, providing him with notice that the new contract would take effect in two years. Wronko wrote back that he still did not accept it. Two years later, the president wrote Wronko again, enclosing the new contract.
Wronko was reminded that he had now been given two years notice of the change, and that, if Wronko didn’t want to accept the new contract, he would have no job at all.
Wronko responded that he still refused to accept this new contract. He took the position that Western’s telling him he had no job if he didn’t take the deal effectively fired him. He stopped attending work and requested his two-year severance package under the original contract.
The company was astounded. As far Western was concerned, Wronko had known this change was coming for over two years. If Wronko didn’t wish to accept it, he should have spent those two years looking for another job. If Wronko stopped coming to work, it wasn’t because he was fired, but because he resigned. The company refused to pay Wronko, who then sued for wrongful dismissal.
At trial, the court ruled that the company was right — telling Wronko that the change was coming and providing adequate notice to him under his contract fully satisfied its obligations.
Wronko knew what was coming so had nothing to complain about. When he walked away from his job, he wasn’t entitled to any severance at all.
Wronko took his case to the Court of Appeal for Ontario, which ruled that Western had to pay Wronko the full two-year severance.
Providing Wronko with working notice that this change was coming was insufficient, it said. Western had to provide Wronko with an ultimatum right from the start.
The company was liable because it did not notify Wronko at the beginning that he would be fired if he refused. Since Western failed do that, the Court of Appeal gave it no credit for any of the advance notice.
From time to time, employers need to make changes that employees will resist. In the current downturn, many employers are looking for employees to tighten their belts, just as they must themselves. Not every employee will agree.
Advance notice can help employers reduce, even eliminate, the cost of such changes. To be safe, employers need to take a hard line when they make a change.
Here are some steps to take:
- Ask employees to sign off on the change, in writing.
- If the employees refuse, don’t just warn that the change is coming. Notify the employees in writing that they will be terminated, effective on a specific date. The length of notice necessary will vary with the circumstances.
- At the same time, offer to rehire the employees on new terms, effective on the date of the changes.
- Follow through on the threat. If the employees don’t agree to the new terms, fire them.
Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers. He practises employment law in eight provinces and is author of The Law of Hiring in Canada, soon to be released.