BC Court of Appeal Overturns Verdict which Enforced Oral Contract for Severance Package

Written on behalf of Peter McSherry Law Office
Background Shape/Fill/Blue Shaded

The British Columbia Court of Appeal has overturned a British Columbia Supreme Court decision that awarded a former employee damages for breach of an employment contract when his employer refused to honor a severance package the Plaintiff said was orally agreed upon.

What Happened? 

When the employee moved from a union to a supervisory position with Highland Valley Cooper in 1993, he allegedly orally agreed to a retirement package during a discussion with human resources. The employee ultimately retired after more than 30 years with the company, which then refused to provide him with the retirement package he expected to receive – one valued at $175,000 based on 18-months salary.

The employer, Teck Highland Valley Copper Partnership (HVC), operated a large copper mine in British Columbia. Despite the company going through ownership and name changes over the years, the judge found there had been continuous employment throughout the employee’s 30+ years of employment.

The employee started out with HVC in a unionized position, which came with many benefits, including a severance package of one-month’s salary for each year of service – benefits a unionized employee would lose if they moved into a non-unionized staff position.

The employee claimed that when he was approached about taking on a non-unionized staff position, he was told “he would be entitled to one month per year of pay as severance up to a maximum of 18 months.” The employee also added that he thought “severance” was being used not just to describe termination, but also in relation to retirement.

The Original Trial

During the first trial, the HR representative with whom the employee had met testified that he was unauthorized to make such promises to the employee on behalf of the company and that he would have been very clear about that with the employee (though he did admit that he may have noted what the severance package was at the time).

The original trial judge found that there was an express term in the employee’s contract guaranteeing payment upon retirement and awarded the Plaintiff $176,250 in damages.

The Appeal

HVC appealed the decision on the grounds that the original judge had erred in making a finding for which there was no evidence (the express oral term), and that the term found was not sufficiently certain and enforceable. 

In its decision, the Court of Appeal looked closely at the employee’s recollection of his conversation with HR, noting the employee “repeatedly denied that [the HR representative] ever linked the Package to retirement. He said [the HR representative] only promised him a “severance package” without any discussion or explanation of its nature.”

The Court ultimately found that despite the employee’s misunderstanding of the definition of “severance”, there was no evidence that the employer had intended to extend the definition of this term to include retirement. The original trial judge had erred in finding otherwise.

The Court allowed the appeal, setting aside the trial judge’s order.