Company president challenges $1.5 million award, claims more against employer

The Court of Appeal for Ontario recently dealt with an employment law case involving a wrongful dismissal claim and a cross-appeal on costs.

The decision delved into key legal issues such as the validity of employment contracts, the importance of fresh consideration, and the high threshold for appealing costs awards.

In this case, a successful investment banker who was experienced in the mining sector was recruited by an employer to serve as president and co-head of banking in early 2016.

The parties entered into an initial employment contract in April 2016, followed by a second one in July 2016. However, the employer terminated the worker's employment without cause in January 2018, less than two years after hiring him.

The worker claimed that the termination was wrongful and sought damages based on the terms of the initial contract.

Trial judge’s decision

The trial judge held that the worker was wrongfully dismissed by the employer. He awarded the worker compensatory and punitive damages totaling $671,765, including interest, as well as partial indemnity costs of $830,761.75, including disbursements and HST.

The worker appealed the damages award, arguing that the trial judge should have calculated the damages based on the terms of the initial contract rather than the second one.

To succeed on this ground of appeal, the worker would have had to persuade the Court of Appeal that the trial judge made a series of errors of law and mixed law and fact in finding that the second contract was valid, binding, and enforceable. However, the Court of Appeal found that the worker did not do so.

The importance of ‘fresh consideration’

The Court of Appeal emphasised the significance of fresh consideration when amending employment contracts.

As the trial judge correctly noted, "employers do not have the right to alter a contract unilaterally unless something 'new and of benefit' (beyond continued employment) flows to the employee in exchange for their agreement to the amended terms."

In this case, the trial judge found that there was fresh consideration for the second contract, including a $40,000 payment by the employer to cover the worker's costs of severing his previous contract and an entitlement to two weeks of additional paid vacation time.

The Court of Appeal agreed with this finding, stating that "the trial judge found that the additional vacation entitlement by itself constituted fresh and non de minimis consideration."

The Court of Appeal also noted that "courts are concerned with the existence, rather than the adequacy, of consideration" and rejected the worker's contention that the trial judge was required to do a comparative analysis of the overall advantages and disadvantages of the first and second contract in assessing whether there was fresh consideration for the latter.

Imbalance in employment relationships

The Court of Appeal also addressed the power imbalance between employers and employees in the context of contract negotiations. The trial judge recognised that "consideration is particularly important in the employment context due to the inequality of bargaining power between the parties and the vulnerability of an employee who depends on the remuneration they receive."

However, the trial judge found that the power imbalance was mitigated in this case due to various factors, such as the worker's access to information about the employer's operations, his experience in negotiating contracts, and his representation by counsel throughout the negotiation of the second contract, which lasted over a month.

High threshold for appealing costs awards

The employer cross-appealed the trial judge's costs award but was unsuccessful in obtaining leave to appeal. The Court of Appeal reiterated the high threshold for appealing costs awards, stating that leave will not be granted "in the absence of 'strong grounds upon which the appellate court could find that the judge erred in exercising his discretion'."

The trial judge had made numerous findings unfavourable to the employer, concluding that it had conducted the litigation in "an unforgiving, scorched earth, and bare-knuckle manner" and had missed "no opportunity to malign [the worker]." The Court of Appeal found that these findings amply justified the partial indemnity costs award.

The Court of Appeal also noted that the trial judge followed the correct principles and took appropriate factors into account in fixing costs, and that costs awards are highly discretionary. As stated in the decision, "This court will not set aside an award unless it is based on an error in principle or is plainly wrong."

Case’s outcome and consideration

Ultimately, the Court of Appeal dismissed the worker's appeal and the employer's motion for leave to appeal the costs award. The decision serves as a reminder of the importance of fresh consideration when amending employment contracts and the high threshold for appealing costs awards.

The Court of Appeal's reasoning emphasises the need for employers to carefully consider the terms of employment contracts and to ensure that any amendments are supported by valid consideration.

It also highlights the discretionary nature of costs awards and the deference accorded to trial judges in making such decisions.