Last year’s Pound v. iWave exposed the perils of a carelessly drafted employment agreement, when an Employer unintentionally imposed upon itself more obligations than the minimum legal requirement.

Glenn Pound was hired by iWave Information Systems in November 2014 as its Marketing and Communications Manager. The offer of employment provided:

Your employment will be probationary for the first 3 months… When a termination of employment is necessary, the employee will be given a letter detailing the reason for termination. This letter will also detail the process (return of equipment, payout of commissions, etc.) that will be followed as part of the termination.

Two weeks before the end of the probationary period, iWave terminated Pound’s employment. The termination letter stated:

I regret to advise that we do not wish to continue beyond your three-month probationary period and your employment with iWave Information Systems Inc. (iWave”) is terminated, effective today… Please sign this letter and return it to me within seven days.

Pound brought an action for wrongful dismissal against iWave, claiming breach of contract and breach of common law obligations with respect to a probationary employee. He argued that he was not given any reasons for his termination, nor was he given an opportunity to address any issues.

The trial judge found that iWave complied with its contractual obligation to give detailed reasons for termination. He held that while the letter was terse, it did comply with the employment agreement because it referenced the probationary period and indicated to Pound that it did not wish to employ him beyond it. Citing the principles set out in Alexander v. Padinox Inc., PEI’s leading case on the determination of rights for probationary employees, the trial judge further held that iWave had fulfilled its common law obligations.

Pound appealed to the Prince Edward Island Court of Appeal.

The Court disagreed with the trial judge and found that iWave’s termination did not comply with the requirements of the employment agreement because it failed to provide any reasons for the termination. In the Court’s view, “neither Pound nor anyone else would know from the letter the reason for termination.”

The Court further held that even in the case of a probationary employee, if it had concerns about the employee’s performance, the company should have begun to provide the employee with the progressive discipline steps set out in its Policies & Guidelines. Its failure to do so was a material breach of the employment agreement.

The Court awarded Pound damages in the amount of $15,625, representing three months’ pay in lieu of notice. By carelessly wording its probation clause, iWave took on greater obligations than the minimum legal requirements which resulted in this damage award.

Lessons for Employers

This case serves as a reminder to Employers to carefully draft all contracts and policies and to always avoid thoughtlessly using templates or precedents. It is important that Employers understand the obligations to which they agreed to in their employment agreements. A failure to fulfill these obligations may result in a damages award against them. Employers should always have an experienced Employment Law lawyer draft and update all employment agreements and policies and obtain advice on each specific term so that they know their legal obligations to their employees.

Lessons for Employees

When a term in an employment agreement is vague, a Court is more prone to construe these terms in the Employee’s favour rather than the Employer’s. The wording of the employment agreement and the Employer’s efforts to comply with the terms will determine what the Employee’s rights are. When Employees’ are terminated they should always seek advice from an experienced Employment Law lawyer regarding whether the Employer has complied, and if not, what monetary compensation a Court may award them.

Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.

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