When is a fixed term employment contract not enforceable? A recent decision of the Ontario Superior Court in Tossonian v. Cynphany Diamonds Inc. addressed this issue. The court held that the fixed term guarantee was not part of the original deal between the parties and threw out that part of the contract. The plaintiff was still awarded wrongful dismissal damages but they were much lower than they would have been if the employment contract had been enforceable.
The plaintiff, Razmig Tossanian, moved from Vancouver, B.C. to accept a position at Cynphany Diamonds in Toronto. According the trial decision, the plaintiff was looking for an opportunity to move his family to Toronto. After lengthy negotiations, he accepted an email offer of employment that purported to be based on an oral agreement. The email set out the various terms that had been agreed upon, but made no mention of a five year fixed term. The plaintiff did not respond in writing, though he indicated that he had called the owner of Cynphany to confirm the five year guarantee.
The plaintiff moved from Vancouver to Toronto without anything further in writing. He began working for the defendant in late August 2011.
Some weeks later, the parties signed an “Employment Contract.” This document did not reference the five year term. A further document, for mortgage purposes was prepared, and signed by the defendant. The second document stated that the plaintiff had a “guaranteed five year position.”
There was yet another document that also referenced a five year period, which was also prepared for mortgage confirmation purposes. When the bank called to confirm, the owner of the defendant confirmed the five year term.
Mr. Tossanian worked for a total of approximately 8 months for the defendant. At some point, according to the evidence, the plaintiff began having discussions with another potential employer and he shared information with these discussions with at least one co-worker. He apparently suggested to his co-worker that he had a guaranteed job if he was fired by Cynphany Diamonds. The owner of the defendant found out about these discussions and became quite upset. There was a factual dispute about whether or not the plaintiff resigned or was fired but the evidence seems to be fairly clear in this regard that he was fired. He was not fired for just cause as it is not cause to fire an employee for looking for other work. Just cause was not argued at trial.
After being dismissed, the plaintiff went to the potential employer but the job opportunity that he had been pursuing fizzled. Ultimately, he wound up returning to Vancouver and going back to his old position after just more than 4 months. This position was at a much lower rate of pay.
The plaintiff sued for wrongful dismissal. He alleged that he had a five year fixed term employment agreement and that it had been breached. Even though he found work after four months, he claimed that his losses over a period of five years would amount to approximately $175,000.
The court does not seem to have been impressed by the plaintiff or his evidence. Despite the various written agreements, the court held that the initial email between the parties was the key document and it did not reference a five year term. Although the employer made “inflated representations about the duration of Mr. Tossanian’s employment contract to help him get a mortgage” the five year term had not formed part of the initial employment contract. The court held that there was no new consideration for the five year guarantee. The decision notes that the presiding judge did not feel that a salesperson of fine jewellery would require a five year fixed term employment contract.
Even though the court refused to find that there had been a five year guarantee, it still found that the plaintiff had been wrongfully dismissed. The court then had to turn to the applicable notice period. The judge was not particularly sympathetic to Mr. Tossonian. He was awarded a total notice period of two months, amounting to just over $13,500. This was awarded after a trial that spanned over seven days, not to mention all of the preliminary motions, examinations and other court appearances. Ouch!
In some respects, the decision is puzzling. The plaintiff had at least two documents, signed by the defendant, providing for a guaranteed five year period. Although the owner of the defendant provided evidence that things were not really as they seemed, the court’s explanation of why the five year fixed term employment agreement should not be enforceable is not particularly convincing. If the defendant signed a document guaranteeing a five year period, provided that document to third parties and answered oral inquiries in a manner consistent with that document, there seems to be ample reason to find that the document was binding.
The court’s decision was likely coloured by the plaintiff and by the court’s assessment of the plaintiff as a witness. The judge did not seem to like the plaintiff’s explanation as to why the five year fixed term was not included in the original email. The court was less than impressed by the plaintiff’s efforts to find work for another employer, while still employed by the defendant. In particular, the court found that the plaintiff had discussed that with at least one other employee and this caused the judge to empathize with the employer. As well, the court noted that the plaintiff returned to his old position reasonably quickly after being dismissed and may have had other opportunities as well.
The judge’s assessment of the plaintiff and that plaintiff’s character was quite damaging. Not only did the court reject the five year term but it also awarded the plaintiff a very short notice period of only two months. Courts have a great deal of latitude in selecting the appropriate notice period. Although judges are supposed to consider the length of service, age, type of position and a variety of factors, decisions are inevitably coloured by the likeability of the plaintiff as a witness.
It may well be that this case is headed for an appeal to the Ontario Court of Appeal for a reassessment. While the two month notice period is probably not likely to change if the Court of Appeal upholds the court’s findings, the real issue is whether or not the employer was bound by a five year employment contract. This seems to be a question of law and one which the Court of Appeal may well consider carefully and could even reverse, depending on the particular Court of Appeal panel.
The decision is a reminder of some very key points that apply to many employment law situations:
1. An enforceable contract must contain all of the terms and must be agreed upon by both sides, in advance, prior to the start date. Oral representations, side agreements and “confirmation of employment letters” may not be binding if they conflict with the original contract;
2. Where an employee finds work after being dismissed, courts will be reluctant to award large scale damages unless there is a very compelling reason to do so;
3. Whether or not a witness makes a favourable impression on the court is crucial. If a court has concerns about a witness’s honesty, character, motivation or if a court has other concerns, that may well have disastrous consequences for that side.