A recent BC Supreme Court case is yet another reminder that courts will carefully scrutinize any term which purports to displace an employee’s common law entitlement to reasonable notice of termination of employment, particularly where the term has not been clearly and unambiguously communicated and accepted by the employee. Employers can contract out of the requirement to provide an employee with reasonable notice, so long as the contract provides the employee with at least the minimum amount of notice (or pay in lieu) that the employee is entitled to pursuant to provincial employment standards legislation. However, the case of Fernandez v The University of British Columbia, 2018 BCSC 1993 (“Fernandez”), is a reminder that there are risks associated with including this type of key term in an employee handbook instead of an employment contract.
Mr. Fernandez began working as a research assistant/technician at the University of British Columbia (“UBC”) on October 1, 2008. At some point after he started work, UBC gave him a letter that asked him to both familiarize himself with an enclosed Handbook for Technicians & Research Assistants (the “Handbook”), while at the same time stating that a copy of the Handbook would follow by mail. The letter stated that the Handbook included the terms of his employment with the university.
When UBC decided to terminate Mr. Fernandez’s employment, on a without cause basis, on August 11, 2016, it told Mr. Fernandez that it would continue his salary for a period of seven months and three weeks, in accordance with the severance provisions in the Handbook. UBC then paid Mr. Fernandez’s salary and continued his employee benefits for that period.
Mr. Fernandez argued that the Handbook was not part of his employment contract, and that as a result, he was entitled to common law reasonable notice of termination. He commenced a wrongful dismissal action seeking 12 to 13 months’ notice from UBC.
The Problem with the Employee Handbook
The Court decided that the Handbook did not form part of Mr. Fernandez’s employment contract because he had not showed any intention to be bound by the terms and conditions in the Handbook when he began employment with UBC. The Court pointed out that it was confusing to provide Mr. Fernandez with a letter that referred to a Handbook being enclosed with the letter, as well as advising him that he would be sent the Handbook later in the mail. In addition, Mr. Fernandez testified at trial that he did not acknowledge receiving either the letter or the Handbook, nor did he recall the terms of his employment ever being discussed at the time of hiring.
The Court found that the severance pay provision in the Handbook was unenforceable, which meant that Mr. Fernandez was entitled to common law reasonable notice of termination. Considering his age (54), length of service (just under eight years), character of employment (no managerial or supervisory responsibilities), and minimal mitigation efforts (he did not look for new employment until after his severance ran out, at which point he found similar work at an increased salary), the Court held that seven months and three weeks constituted reasonable notice in the circumstances. While Mr. Fernandez’s claim was ultimately dismissed because the Court found that the salary continuance provided by UBC amounted to reasonable notice in the circumstances, this salary continuance would likely have been viewed as inadequate if Mr. Fernandez was a longer service employee, had a more specialized role, or was in a managerial level position.
In the earlier case of Cheong v. Grand Pacific Travel & Trade (Canada) Corp., 2016 BCSC 1321 (“Cheong”), the BC Supreme Court reached a similar conclusion about a termination provision in an employee handbook. In that case, the Court found that the handbook was not referred to by the parties at the time of hiring, that the employee had never expressed an intention to be bound by the handbook, and that there were provisions in the handbook which suggested that the employer did not intend it to have contractual force. As a result, the termination provision was unenforceable. If it had been enforceable, she would have been limited to a 2 month notice period. Instead, the court awarded her damages based on a 14 month reasonable notice period.
Employee handbooks remain a useful way to communicate employee expectations and important workplace policies and procedures in an efficient manner. They can also be more easily updated and amended than employment contracts. However, in light of cases like Cheong and Fernandez, it is clear that courts will closely scrutinize how the terms in an employee handbook have been communicated to an employee, and whether the employee has in fact agreed to be bound by the handbook as a term of their employment.
Takeaways for Employers
We encourage employers to regularly examine all workplace policies and procedures, including employee handbooks. When conducting such reviews, it is important to keep the following points in mind:
- Discuss important terms and conditions of employment with employees at the time of hiring;
- Put termination provisions in an employment offer letter or employment contract (not a handbook) to increase the likelihood that a court will find them enforceable; and
- Get employees to sign-off on having reviewed the terms of all important workplace policies and procedures, and have a system in place to track such acknowledgements.
If you have questions about whether your employee handbook is binding on your employees, you can contact any of the lawyers in Lawson Lundell’s Labour, Employment, and Human Rights Group.
Lawson Lundell's Labour and Employment Law Blog provides updates on the most recent legal developments impacting the Canadian workplace and offers practical tips for employers. We cover a range of topics, including labour relations, employment law, collective bargaining, human rights, employment standards, employment equity, workers' compensation, business immigration, privacy, occupational health and safety and pensions and employee benefits.