Good Faith and Employment Contracts

Written on behalf of Peter McSherry

In a prior post, we reviewed the appeal process in the context of “the Uber arbitration” clause which is now pending.

There is another case coming before the Supreme Court of Canada shortly which will very likely have a considerable impact on the interpretation of employment contracts in Canada.

The Case in Issue

The case under appeal comes from the Nova Scotia Court of Appeal.

The plaintiff had been successful in showing that he had been “constructively terminated” as a result of the abusive conduct of the employer. He was awarded a damage claim based on 15 months’ notice. The argument was then made that he should have been entitled to the income sum he normally would have earned in this time period. This included a claim for an exceptional bonus sum of roughly $1 million based on the sale of the company in this time period.

The company’s defence to this particular claim was the wording of the bonus claim which denied such a sum, as the contract required active employment to eligible for the payment. Usually, this would be a good defence.

Point of Debate

The issue of controversy centres on the conduct of the company.  The trial judge and indeed all judges of the Court of Appeal found that the employee had been lied to and treated abusively by his boss which led to the finding of constructive dismissal.

An earlier decision of the Supreme Court of Canada had spoken to the obligation of good faith and fair dealing in the performance of contractual obligations.

One judge of the Court of Appeal, speaking in dissent, had determined that the contract was to be interpreted based on these principles and that “no amount of lies or deception by [his immediate boss] should serve to deny Matthews of that [LTIP] benefit”….and further “The court must not condone the avoidance of contractual obligations that are founded on such a lack of integrity”.

This is the central issue that the Supreme Court will decide. It will be a critical decision and will no doubt have a considerable impact on the interpretation of employment contracts in Canada. Stay tuned to this station.

Get Advice and Know Your Rights

Get advice. Know your rights. Contact the offices of Guelph employment lawyer Peter A. McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation