IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]           This case is about the enforceability of a termination clause contained in a contract of employment.

[2]           When the defendant company hired the claimant, the parties entered into an employment contract that contained a termination clause.  After several years the claimant’s employment was terminated and the defendant paid 7 weeks’ severance in accordance with the termination clause.

[3]           The claimant argues the termination clause is unenforceable and he is entitled at common law to payment in lieu of reasonable notice.  His argument is based on the fact that the, termination clause refers to the notice provisions found in the Employment Standards Act, 1996 R.S.B.C. c. 113 (“ESA”) and because he is a professional engineer, that he is exempted from the Act and therefore, the termination clause is unenforceable.

[4]           If the above argument is not successful, the claimant argues when he received his professional engineering designation that his duties changed to such a degree that the substratum of the employment contract changed with the result that the termination clause is no longer binding.

[5]           The defendant argues that provisions of the ESA can be referentially incorporated into the employment contract and therefore the termination clause is binding.  The defendant also argues that any changes in the claimant’s employment were incremental and not significant enough to find that the substratum of the contract changed.

[6]           Finally, and if the termination clause is not binding, the defendant argues the claimant failed to take reasonable steps to mitigate his damages.

[7]           This Court must decide if the termination clause is binding.  If the Court finds that it is, then the Court must determine if the substratum of the contract had changed to such a degree that the contract is no longer binding. 

[8]           If the Court finds that the termination clause is not binding, then it must determine what would be reasonable pay in lieu of notice and if the claimant took reasonable steps to mitigate his damages.

[9]           In 2008, the claimant graduated with a degree in Integrated Engineering from The University of Western Ontario.  Shortly thereafter, the claimant was hired as an Engineer Assistant by the defendant, Atlas Anchor Systems (B.C.) LTD.

[10]        When the claimant was hired, the defendant presented him with a contract titled, “Employment Contract” (the “contract”).  On June 12, 2008, the claimant signed the contract.  Prior to signing the contract the claimant had a full opportunity to consider it.  He also had the opportunity to seek legal advice but he chose not to.

[11]        The contract indicated the position being offered was: “Engineering Assistant - Head Office.”  A brief description of the principal job responsibilities was attached and formed part of the contract. 

[12]        The contract also contained a provision regarding termination.  This provision reads:

[13]        The claimant’s responsibilities involved: going to job sites, writing reports, performing product testing, attending Canadian Standards Association (“CSA”) meetings, doing calculations, performing the function of safety officer, making purchase orders, research and development, operating computers and machines, driving fork lifts and helping with warehouse inventory control.

[14]        In April 2013, the claimant received his Professional Engineer’s designation.  When this occurred, Mr. Bryan Robinson sent a letter to the claimant.  The letter set out the claimant’s duties as follows:

[15]        The letter confirmed the claimant would receive a salary increase to $70,000 and there was a recommendation that he purchase Errors & Omissions Insurance with the cost being his responsibility.

[16]        With respect to the salary increase, evidence in the defendant’s book of documents satisfies me that the increase was $18, 000 over the claimant’s previous annual salary of $52, 000. 

[17]        Once the claimant received his designation his duties changed.  He no longer went to job sites, nor did he prepare reports.  He stopped being involved in work place safety, and he started leading research and development.  He approved reports and drawings and he confirmed calculations.  He went to management meetings and he started representing the defendant in the development of standards with CSA.  

[18]        After 27 months as a professional engineer, the defendant terminated the claimant’s employment without cause.  The defendant paid the claimant in accordance with the termination clause which was calculated to be 7 weeks’ pay.

[19]        In cross-examination the claimant was challenged over what he identified as being his new responsibilities.  One of the areas where he was challenged was whether or not he supervised others.  I took from his answers that he did not supervise others in the sense that he set their employment hours, or dealt with their leave, rather, he simply was one level of oversite and guidance for those working on or developing projects.

[20]        As for his job search, the claimant produced in excess of three hundred emails that he sent with his resume to prospective employers.  In cross-examination the defendant highlighted aspects of the claimant’s job search including, the changes to his resume, and that he was applying for jobs for which he was not qualified. 

[21]        Mr. Daniel Chen, the corporate president of the defendant company testified for the defendant.  Mr. Chen had worked for the defendant from 2002 - 2006 and then he resumed working for them in 2015.

[22]        According to Mr. Chen even professional engineers are required to do calculations.  He mentioned that they do not do all of the calculations but they still must perform the calculations for verification purposes.  He also confirmed that the claimant was involved in the certification, design and guidance associated with a project at UBC.  He was unsure about other projects that the claimant may have been involved in.

[23]        Mr. D’Sa, the controller of the defendant company testified.  He has been with the company since April 2009.  His duties include payroll, health and safety, inventory and costing.  He had some knowledge of employment contracts that were kept in the personnel files.

[24]        Mr. D’Sa confirmed the claimant’s salary increases.  As for the claimant’s work, he testified that prior to the claimant receiving his professional designation that the claimant had responsibility for research and development, costing, and inventory.  Mr. D’Sa could not recall what type of engineering functions the claimant performed.

[25]        According to Mr. D’Sa, once the claimant received his professional designation, the responsibilities of health and safety, costing, and inventory were passed to others and the claimant assumed the role of signing off on drawings and projects.  Mr. D’Sa testified that the claimant was not a direct supervisor and he did not have people reporting to him.  

[26]        The claimant asserts the termination clause is not enforceable because of the reference to the ESA.  He argues the ESA does not apply to engineers and therefore the defendant cannot rely on the termination clause for the calculation of what is reasonable pay in lieu of notice.

[27]        The defendant responds by arguing absent unconscionability, an employment contract can, by reference, incorporate provisions of the ESA even if the profession involved is one that is exempted from the ESA.

[28]        In U.B.C. v. The Association of Administrative and Professional Staff on Behalf of Bill Wong, 2016 BCCA 491, it was argued that an accountant was by profession exempted from the ESA and therefore the incorporation of the ESA notice into his collective agreement resulted in the provisions not being enforceable and therefore he was entitled to the common law period of pay in lieu of notice.

[29]        In dealing with the matter the Court, agreed with the reviewing chambers judge who stated at paragraphs 34-35:

[30]        In Brown v. Utopia Spas and Salons Ltd., 2014 BCSC 1400, the court commented specifically on the incorporation of ESA provisions into an employment contract and stated at paragraphs 17 - 18:

[31]        The above authorities are binding on this Court.  As such, I conclude, the contract properly incorporated provisions from the ESA and that the parties agreed to be bound by these terms.  Accordingly, and there being no evidence of unconscionability, I find the termination provision enforceable.

[32]        The claimant asserts the changes to his employment responsibilities were substantial, thus, changing the substratum of the contract and rendering the termination clause unenforceable.

[33]        The defendant argues changes to the claimant’s responsibilities were expressly set out in the contract signed by the parties.  As such, the parties agreed to being bound by the termination clause despite changes to the claimant’s responsibilities.

[34]        In considering the issues, the defendant argues the claimant’s evidence is lacking in credibility and should not be accepted.  Some of the concerns raised by the defendant are:

[35]        I have carefully considered the claimant’s evidence and although there are a few areas that cause the Court some concern those areas are minor and explained contextually.  For example, on the issue of supervising, I accept the claimant was not a supervisor in that he did not schedule work hours, approve leave and monitor all aspects of an employee’s work.  However, I accept, from the claimant’s perspective, he did oversee work that was done on projects and in this regard one could conclude he did some oversite and thus he was partially a supervisor.

[36]        As for the claimant’s reluctance to discuss the partnership he formed and the work that was being done by the partnership, I do not see this as impacting his credibility.  From the evidence it appears the partnership was working on a product that would compete with the defendant company and therefore he was reluctant to disclose any information.

[37]        After considering the entirety of the claimant’s evidence I found him to be generally credible and reliable.

[38]        In Schmidt v. AMEC Earth and Environmental Ltd. 2004 BCSC 1012, Madam Justice Gerow discussed how changes in employment can impact an employment contract and at paragraphs 10 - 11 and 32 she stated:

[39]        A review of the authorities suggests the substratum of a contract will be eroded when there is a substantial or fundamental change in the terms of the employment.  Incremental and predictable changes are insufficient to displace the provisions of a contract: Wernicke v. Altron Canada Corp., 2009 BCSC 1533, Miller v. Convergys CMG Canada Limited Partnership, 2013 BCSC 1589, Schmidt v. AMEC Earth & Environment et l., 2004 BCSC 1012.

[40]        I agree with the defendant that the majority of the claimant’s employment tasks incrementally changed for the period leading up to the claimant obtaining his professional designation.  I accept that when the parties entered into the employment contract that there was an expectation that he would achieve his professional designation.  I cannot accept that the parties knew that this was going to happen because the process involved examinations and approval by a third party.

[41]        On all of the evidence, I find when the claimant received his professional status there was a substantial, sudden and fundamental change in the claimant’s employment and responsibilities.  In this regard, he received a substantial pay increase.  Further, it was recommended that he obtain errors and omission insurance.  Additionally I note; a notice regarding his professional designation was sent to all employees; the claimant was now accepting specialized project engineering responsibilities; the claimant now had the responsibility for reviewing fabrication drawings and calculations; the claimant was now attending management meetings; he was now representing the defendant at CSA meetings and contributing to setting standards; he was no longer doing site reports; and although his work in research and development continued, he was now reviewing the work of others.

[42]        In summary, I find on a balance the change in the claimant’s professional status and the changes in his employment responsibilities were substantial and more than reasonable job changes as contemplated by the contract.  In fact, they were significant enough for the defendant to recommend that the claimant purchase errors and omission insurance.  Accordingly, I am satisfied that the substratum of the June 12, 2008, employment contract was eroded and in the result, the termination clause is unenforceable and the claimant is entitled to the common law calculation of pay in lieu of notice.

[43]        Several factors are to be considered in determining reasonable notice.  These factors include; character of the employment, duration of the employment, age of the employee and the availability of similar employment given the employee’s experience, training and qualifications: Schmidt v. AMEC Earth & Environment et al., 2004 BCSC 1012, at paragraph 37, Bardal v. The Glove & Mail Ltd. (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.J.) at 145.

[44]        The claimant is 30 years old.  He was employed by the defendant for 7 years.  The claimant’s work with the defendant is the only employment he has held since he graduated from university.  The work involved the design of building anchor systems that are placed on roofs of buildings and used for hoists and window washing platforms.  The claimant has sent out in excess of 300 applications and he remains unemployed.

[45]        In Pechenkov v. Borg-warner (Can.) Ltd., [1983] 2 C.C.E.L. 237 (Ont. County Court), the plaintiff was 29 years old, he was an engineer and he had been employed by the defendant for 5 ½ years.  His work was specialized in that they manufactured large pumps and nuclear pumps.  The court concluded 9 months was a reasonable notice period.

[46]        The divergence between the instant matter and the Pechenkov case is the length of service.  As such, and balancing all of the factors, it is my view that the claimant is entitled to 10 months’ pay in lieu of notice.

[47]        The onus is on the defendant to show that the claimant failed to mitigate by not undertaking reasonable efforts in order to find similar employment: Schmidt v. AMEC Earth & Environment et al., 2004 BCSC 1012, at paragraph 50.

[48]        The defendant argues the claimant’s employment search was not reasonable.  In this regard the defendant relied on evidence showing the claimant applied for some jobs that he was not qualified for.  The defendant also highlighted the claimant’s resumes wherein under the heading, “Professional Experience”, the claimant listed his partnership first, rather, than his experience working with the defendant.  Lastly, the defendant submitted that the claimant’s work in the partnership impacted the claimant’s job search.

[49]        Having considered all of the evidence related to the claimant’s job search, I am satisfied that he undertook a continuous and earnest job search.  As for the deficiencies alluded to by the defendant, I observe that there is no exact science on how one searches for a job and that the approach taken can and does vary according to the individual, the field of employment, the parties involved, and the employee qualifications sought.  I also observe there is no evidence showing that the search undertaken by the claimant was so inadequate that it amounted to a failure to mitigate.

[50]        With respect to the claimant’s efforts to find alternative employment, he sent out over 300 letters to prospective employers and he sought the assistance of other engineers.  He tried to make contacts within the engineering community by volunteering at math events and an event where graduating students met with prospective employers.  I find the defendant has not satisfied the court that the claimant failed to mitigate his losses.

[51]        From the 9 months awarded, as a reasonable period of notice, the defendant has already paid 7 weeks in lieu, thus, a balance of 29 weeks remains outstanding.  Based on an annual salary of $70,000 this net amount is $39,038.46. 

[52]        The claimant abandons any amount over $25,000, as such the award is $25, 000 with court ordered interest commencing September 15, 2015, with filing fees of $156.00 and service fees of $80.00.