YEAR-LONG HIATUS AND HANDBOOK DID NOT LIMIT EMPLOYEE’S LENGTH OF SERVICE OR SEVERANCE

Legal industry news
  • News
  • October 12, 2016

YEAR-LONG HIATUS AND HANDBOOK DID NOT LIMIT EMPLOYEE’S LENGTH OF SERVICE OR SEVERANCE

An employer was not permitted to discount an employee’s period of employment due to her break in employment when determining her severance entitlement because the employer had agreed to recognize her earlier service. Further, an employee handbook which purported to limit her severance did not have contractual force.

In Cheong v. Grand Pacific Travel & Trade (Canada) Corp, 2016 BCSC 1321, the plaintiff was a 59 year old director of sales and marketing for a wholesale travel business. She was employed for about ten-and-one-half years before she resigned and worked elsewhere for about a year. She then returned to work for the employer with the same title for another two-and-one-half years before her employment was terminated.

The employer provided her with two weeks’ pay, which it argued was her only entitlement upon termination pursuant to the provisions in its handbook. The plaintiff argued that the terms of the handbook were not part of the terms of her employment contract. She also claimed that her length of service for the purposes of her severance included the period of employment prior to her hiatus.

The handbook was introduced during the plaintiff’s first period of employment by way of an email to all staff. The employer noted in its covering email that any “feedback or questions” about the handbook’s content should be provided within seven days or the employer would “deem all staff members fully understand all terms and regulations” and would observe and abide by them. The plaintiff raised no questions or concerns with the employer concerning the handbook.

Approximately one year after leaving her employment, and while working in the same industry for another company, the employer contacted her and asked if she would be interested in returning to work for it. The plaintiff summarized her telephone conversations with the employer, confirming her expected terms of employment in an email to the owner. Her email stated, in part, that her previous years of service would be “credited back to her”. There was no reference to the handbook. The owner did not respond to the email.

About two-and-one-half years after rejoining the employer, the plaintiff’s employment was terminated during a telephone conversation because she had been unable to develop a Caucasian market for the employer.

The Court first determined that the plaintiff’s entire employment service of almost 13 years should be recognized for the purposes of determining her notice period. The Court held that a gap in service will be disregarded for the purposes of assessing an employee’s entitlement to reasonable notice if the parties expressly agree that the prior service would be recognized or otherwise conducted themselves in a manner consistent with the recognition of the employee’s prior service.

The judge had no difficulty in concluding that it was an express term of the plaintiff’s re-employment that her prior years of service would be recognized for all purposes. The plaintiff testified that the employer expressly agreed that her prior years would be recognized and there was no contrary evidence from the employer.

In addition, the judge held that the parties had conducted themselves in a manner consistent with the recognition of her prior service, as the employer had actively pursued the plaintiff to return to its employment, the employer did not respond to her email which made it clear she expected her prior service to be recognized and the plaintiff was treated as a long-term employee rather than a new employee when she returned.

In particular, the Court noted that on her return to the employer, the plaintiff received: the same pay she had previously received; three weeks annual vacation (as opposed to the two weeks ordinarily provided by the employer to new employees); immediate benefit coverage without any waiting period; and a laptop computer as a “gift for long service”. Nor was she subject to a probationary period.

The judge then considered whether the terms of the handbook, and in particular the termination provision, were binding on the plaintiff. He found that they were not because the handbook was not referred to during the formation of the plaintiff’s new employment contract and several of the handbook’s provisions were not followed by the parties.

Although the plaintiff was aware of the handbook from her earlier period of employment, the Court refused to infer that she had agreed to be bound by it when she returned to work because there was no evidence that she had done so. The Court also determined that the handbook did not have contractual force during the plaintiff’s first period of employment because there was no evidence that the employer offered its employees any consideration, or benefit, in exchange for agreeing to the terms of the handbook. Nor had the plaintiff indicated her acceptance of the handbook by signing a copy of it.

Further, certain provisions suggested that the handbook was not meant to have contractual force. For example, sections of the handbook indicated it was provided for “information and guidelines”, while other provisions indicated the employer had the right to “unilaterally change the handbook” or that the provision’s application was within the employer’s discretion.

After determining that the availability of alternate employment was limited for the plaintiff, the Court awarded her 14 months’ damages, including salary, bonus and compensation for loss of employer-paid MSP coverage and CPP contributions, less the income she earned during the notice period.

This case emphasizes the need for employers to carefully consider what terms of employment are applicable to their employees before deciding to end the employment relationship and not to assume that any handbook or policy manual is enforceable.