Contracts can be changed

Work and struggle and never accept an evil that you can change. — Andre Gide (1869-1951)

Even a chief executive can be forced to accept a demotion if the company manages its case properly. Darrell Wronko incorrectly assumed the right to two years’ severance he had negotiated in his employment contract was written in stone. In fighting his employer’s attempt to reduce his notice period by more than 70%, he learned that employment contracts can be changed if sufficient notice is provided.

Wronko worked with Western Inventory Services for 17 years. He was promoted to senior management in December, 2000, and his salary rose to $143,000 a year plus a car allowance.

Along with this promotion company president Nicholas Ford agreed to boost the termination provision from 20 weeks to 104 weeks (two years).

When Ford retired in 2002, Sean Davoren, formerly a vice-president the same level as Wronko, became president. Unable to find a copy of Wronko’s contract, Davoren asked Wronko to agree to replace his termination provision, which Davoren thought was 20 weeks, with a notice period capped at 30 weeks.

Wronko politely told Davoren the proposal ignored the two-year notice agreement made in December, 2000. Believing Wronko had colluded with Ford to negotiate a “sweetheart deal,” Davoren insisted Wronko agree to a new contract consistent with those of other company vice-presidents.

Faced with Wronko’s refusal to agree to this change to his contract, Davoren sent a letter in September, 2002, giving two years’ notice of an amendment to the termination clause. Effective September, 2004, Davoren’s 30-week cap would apply. When the date arrived, Davoren referred back to his letter, and gave Wronko a choice: Accept the 30-week notice cap or “we do not have a job for you.”

Wronko treated this as a termination, and asked for his two-year severance package. In response, Western Inventory claimed Wronko had fulfilled its notice obligation and Wronko had no case because he had resigned.

At trial, Wronko was described by the judge as “an engaging, articulate person who gave his evidence in a forthright candid manner without embellishment.” Unfortunately his credibility and personality were not at issue, with the case instead turning on what his contract said and the legal box the employer had placed him in.

Western Inventory had every right to amend the employment agreement provided sufficient notice was given to Wronko. While amending the termination provision was a fundamental change, no claim for constructive dismissal could be made given the two-year notice of the change provided in September, 2002.

The following advice will help employers avoid constructive dismissal claims:

- Give employees options as to how to address continued employment. Once the two-year period had run out, Wronko had little option but to accept the reduced notice period. The Court was persuaded by the fact the firm offered a genuine choice.

- Base decisions on objective criteria. There was no suggestion Wronko had been singled out unfairly, and indeed his case arose because of his having a more generous notice period than others.

- Act in accordance with contractual wording. Although they had to wait two years to bring about the desired result, Western Inventory won because they honoured their contractual notice provision.

- Draft employment contracts that permit flexibility to impose changes. A contract that gives the employer broad scope to assign and amend duties gives the employer the upper hand.

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.