Barr v. Pennzoil-Quaker State Canada Inc. – Ontario Superior Court of Justice – July 23, 2007
A termination offer that is low yet acceptable will be upheld by the Courts if it is agreed to by the employee without duress or unconscionability.
The July 23, 2007 Ontario Superior Court of Justice’s case of Barr v. Pennzoil-Quaker State Canada Inc. [2007] O.J. No. 2859 (“Barr“) highlights the importance of seeking legal advice in regards to a termination offer. Specifically, this case implies that if a termination offer is lower then what an employee is otherwise entitled to, but is still acceptable, then the Courts will uphold the offer agreed to if the employee signs the offer without duress or unconscionability.
In Barr, the employee was terminated without cause from his position with the employer. A written offer accompanied the termination letter which indicated that the employee would receive “2 to 3 weeks’ salary for every year of employment” as pay in lieu of notice. Though it was less then what the employee was otherwise entitled to, the Human Resources Director for the employer, who was also a friend of the employee, told the employee that the offer was above average. The employee never had the offer reviewed by a lawyer.
On many occasions the Human Resources Director spoke to the employee, encouraging the employee to sign the offer and reassuring him of the offer being above average. Additionally, the Human Resources Director told the employee that he “did not need to secure independent legal advice” and that the employer would not pay the employee “any other money whatsoever if [the employee] did not sign off.” Eventually, the employee signed the offer without asking any questions in regards to its contents. The employee later brought a claim for damages against the employer for inadequate pay in lieu of notice. A motion for summary judgment was submitted by the employer to dismiss the employee’s claim. The Trial Judge granted the motion and dismissed the employee’s claim for damages. In reaching this decision, the Trial Judge found that the employee had not signed the offer under duress, nor did the situation satisfy the three requirements for the doctrine of unconscionability, being:
An inequality of bargaining position arising out of ignorance, need or distress of the weaker party;
The stronger party has unconscientiously used the position of power to take an advantage; and
The agreement reached is substantially unfair to the weaker party, i.e., it is substantially divergent from community standards of commercial morality that it should be set aside, thereby requiring the intervention of the court in all the circumstances?
There was unequal bargaining power between the employer and employee, and the employer unconscientiously used this position of power to take advantage of the employee by having the Human Resources Director persuade the employee to sign the offer. Despite this, the Trial Judge stated that before the employee “can succeed under the heading of unconscionability, he must further demonstrate that a genuine issue for trial exists that the bargain he got was sufficiently divergent from community standards of commercial morality that it ought to be set aside, or that it requires the intervention of the court.” The Trial Judge stated that “[the employee’s] package was at the low end of the spectrum of notice periods. I accept that. However, it is within the range of what is acceptable. I conclude that it is not a genuine issue for trial that the package was sufficiently divergent from community standards of commercial morality that it ought to be set aside, or that it requires the intervention of the court.”
It appears from the Barr case that if an employee signs a termination offer, although it may be less then what the employee may otherwise be entitled to, the Court will be hesitant to find the agreement void. As long as the amount of the offer is still acceptable and there is no duress or unconscionability in signing the offer, the Court will uphold the agreement. This decision serves as a warning to both employers and employees. An employer should recommend that an employee seek independent legal advice in regards to the termination offer. Such a recommendation, whether or not it is acted upon by the employee, can aid in strengthening the offer agreed to by demonstrating that the employer attempted to ensure that the employee understand and explore his/her possible legal options. Similarly, an employee should seek the legal advice of an Employment Lawyer when given a termination offer. Such guidance will help protect an employee’s entitlements, assist the employee in understanding any possible alternatives to the offer and avoid undesirable outcomes in the future.