Chad Sullivan and Kathleen Nash

In a recent decision from the New Brunswick Court of Appeal, Abrams v RTO Asset Management, 2020 NBCA 57, the court clarified the procedure for seeking summary judgment and addresses some key aspects of wrongful dismissal actions, including when a termination may be deemed to be without cause, the enforceability of termination clauses, and the calculation of length of service.

Background

The appellant began working for a company called Rentown Enterprises Inc. in 1987 as a driver, moving up to store manager and then Regional Manager for the Atlantic provinces. In 1991, the company was sold to the respondent, RTO Asset Management (“RTO”), a furniture, appliances and home electronics leasing company. The transition to RTO for Mr. Abrams was “seamless” and he worked at RTO continuously until 2002. In May 2002, Mr. Abrams took a two-month leave of absence for job-related medical reasons. RTO contended that Mr. Abrams had “quit” and had issued a Record of Employment (“ROE”) stating such. In July 2002, Mr. Abrams accepted RTO’s offer of an accommodated position and returned to work after signing a new employment agreement.

In 2008, Mr. Abrams was promoted and executed another new employment agreement. In 2012, Mr. Abrams claimed this new position was too stressful for him and he took a second leave of absence for job-related medical reasons. In May 2012, Mr. Abrams returned to work in his previous position as Regional Manager. Despite reduced duties and responsibilities, RTO agreed to maintain Mr. Abrams’ previous salary and car allowance. He signed another employment agreement which expressly superseded all previous contracts and included a very restrictive non-competition clause and a termination clause.

In May 2017, after learning that Mr. Abrams had engaged in a relationship with a subordinate, RTO terminated Mr. Abrams. At the termination meeting, Mr. Abrams was informed he was being dismissed without cause, although RTO had cause for dismissal. Mr. Abrams was provided a termination letter which indicated he was terminated without cause and was offered three months’ pay in lieu of notice. Mr. Abrams rejected the offer and he was subsequently provided four weeks’ pay in lieu of notice in accordance with the termination clause in his employment agreement.

The motion judge’s decision

After his dismissal, Mr. Abrams filed an action in damages for wrongful dismissal against RTO, claiming entitlement to reasonable notice. In its defence, RTO argued it had cause to terminate Mr. Abrams and argued that the four weeks wages in lieu of notice was provided “gratuitously”, as required in the employment agreement for terminations without cause. In the alternative, RTO argued that the termination clause in the employment agreement was enforceable.

Mr. Abrams filed a motion for summary judgment. RTO did not file its own summary judgment motion but, rather, asked for an order “dismissing the claim in its entirety” in a supplementary pre-motion brief filed before the hearing.

The motion judge found there was cause for termination and that there was no issue requiring a trial. She did not examine any other issues. In the result, RTO was granted summary judgment dismissing the action against it, with costs. Mr. Abrams appealed.

The Court of Appeal

Procedural issues – “boomerang motions”

The Court of Appeal began its analysis by considering the procedural issue of “boomerang” summary judgment motions; the informal name attached to summary judgments granted to a party responding to a Rules-compliant motion under Rule 22 of the New Brunswick Rules of Court¹ without making a cross-motion, formal or informal.

The Court of Appeal ultimately concluded that as a general rule – the responding party must file its own motion, holding that a “motion, formal or informal, is a condition precedent to summary judgment under Rule 22, and an order dispensing with that requirement, which is not a matter of form, will be appropriate only in exceptional circumstances.”²

The termination – with or without cause?

On the merits of the case, the Court of Appeal first concluded that the motion judge erred in finding that Mr. Abrams was dismissed with cause. The evidence established that:

• at his termination meeting, Mr. Abrams was informed he was being dismissed without cause;
• his Record of Employment indicated he had been terminated without cause;
• he was provided four weeks’ pay in lieu of notice in accordance with the termination provision in his employment contract; and
• he was provided a letter which indicated a termination without cause.

Despite RTO’s arguments, the Court of Appeal held that it unambiguously terminated Mr. Abrams effective immediately at his termination meeting, on a without cause basis; the termination was not subject to whether Mr. Abrams accepted the offer of three months’ pay in lieu of notice. As the termination letter was the only document relied on by RTO to meet the requirement of written notice under section 30(2) of the Employment Standards Act, and the letter itself stated the termination was without cause, the Court of Appeal concluded the termination could only be without cause.

The validity of the termination clause

The Court of Appeal further held that the termination clause in the employment agreement was void as it purported to contract out of certain benefits under the Employment Standards Act, namely vacation pay on termination and accrued wages. The clause in the employment agreement provided that employment could be terminated on written notice and that once notice or pay in lieu was provided, the employer “shall not be obliged to make any further payments.” As employees are entitled to accumulated vacation pay and payment of any accrued wages after termination, in addition to notice or pay in lieu, any attempt to contract out of such payments renders the clause invalid.

The Court of Appeal confirmed that if even a part of a termination clause purports to contract out of a benefit under the Employment Standards Act, “the entire clause is void, not just the offending part.”³ As the termination clause was void, the presumption of reasonable notice stood un-rebutted.

This case must therefore be added to the growing number of cases which employers must consider when drafting employment contracts which purport to restrict the amount of notice required on termination.

Reasonable notice

The Court of Appeal held that the reasonable notice in the circumstances was 24 months’, given that Mr. Abrams was 55 years old at the time of dismissal, had approximately 30 years’ of service, there was a lack of comparable positions, and he was bound by a very restrictive non-competition clause.

Additionally, the Court of Appeal included Mr. Abrams’ annual bonus, car allowance, and matching RRSP contributions for the 24 month period in the award for damages.

The calculation of Mr. Abrams’ years of service is of particular note. RTO argued that Mr. Abrams had only 15 years’ experience as he was hired as a “new” employee in 2002, after he returned from medical leave and resumed a different position. The Court of Appeal disagreed, finding that in the circumstances, Mr. Abrams’ years of service prior to his leave in 2002 should be considered in the calculation of length of service because the ‘break’ in employment was relatively brief and was for health reasons. Further, although the employment agreement signed by Mr. Abrams in 2002 purported to deprive him of the benefit of his previous years of service, that contract was no longer operative at the time of termination. The most recent employment agreement (in 2012) superseded all previous agreements and it did not include a clause precluding consideration of previous years of service.

Further, with respect to the sale of Mr. Abrams’ first employer’s company to RTO, the Court of Appeal assumed, as there was no evidence to the contrary, that the applicable Alberta legislation would contain a provision similar to section 89 of the Employment Standards Act, deeming RTO to be the employer from Mr. Abrams’ first day of employment, October 15, 1987, to May 29, 2017, the day of his termination.

Key takeaways

The Abrams decision clarifies that parties in New Brunswick can no longer rely on “boomerang” summary judgment motions to obtain relief. Litigants, especially employers, must file their own motions for summary judgments if they wish to obtain judgment in their favour.

Abrams also reminds employers that carefully worded employment agreements and termination letters are key to upholding terminations and limiting damages. Ambiguous employment agreements may fail to rebut the presumption of common law reasonable notice and entitle employees to increased damages. Lastly, as a strategic concern, employers must consider the Abrams decision when determining whether a termination should be effected with or without cause and what reasons will be put in writing.

¹ NB Reg 82-73.
² Para 50.
³ Para 76.

This article is provided for general information only. If you have any questions about the above, please contact a member of our Labour and Employment group.

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