Employment Law – Termination of Employment – Severance – Consideration
Steve Winder and Lara Percy for Raytheon Canada Ltd.

The Plaintiffs both lost their jobs with the Defendant in 2006 when the Defendant closed its Richmond facility. They had both been given notice of their respective impending lay offs in 2005; one Plaintiff worked throughout the notice period and one left earlier for another job. The layoff notices made no reference to any severance entitlement. However, the Plaintiffs claimed that the Defendant had agreed at a “town hall meeting” in January 2004, and subsequently confirmed in writing, to pay severance to terminated employees equal to one month of salary for each year of service, subject to certain adjustments. This type of payment had been the Defendant's past practice. However, the Defendant's past practice did not include providing working notice as well as paid severance. In September 2005, the Defendant advised that the Richmond facility would be closed in September 2006 and employees would be provided with working notice. When the Defendant refused to pay the Plaintiffs severance, the Plaintiffs brought a summary trial application on the basis that the Defendant's comments regarding payment of severance at the January 2004 meeting created a unilateral contract to do so that the Defendant had wrongfully terminated.

The Supreme Court held that the Defendant's comments at the January 2004 meeting were intended to provide an incentive to the employees not to leave the Defendant's employ, given the historically tenuous job security at the Richmond facility. As such, they were intended to create legal relations with the employees and, though the comments did not specifically address whether they were to apply to a complete closure of the Richmond facility, the implication was that layoffs resulting from a complete closure should not be treated any differently. Further, the court found that the Defendant could not unilaterally terminate the contract by advising of the closure of the facility since the employees had already accepted the Defendant's offer by continuing to work for it. However, the court held that it was an implied term of the unilateral contract that only those employees who worked out the entirety of the notice period were entitled to severance on the basis that the reason for the Defendant having made the promise in the first place was to try and keep its employees. Therefore, the Plaintiff who had worked out the entirety of the notice period (Ms. Ciric) was awarded severance, the other Plaintiff was not.

The Defendant appealed the award of severance to Ms. Ciric. The Court of Appeal granted the Defendant's appeal on the basis that Ms. Ciric had provided no consideration for the Defendant's 2004 offer to pay severance. Nothing changed in Ms. Ciric's working relationship with the Defendant after January 2004 and, as such, the severance offer constituted an unaccepted offer only. The court further found that by providing notice of the facility's closure that made no mention of severance pay, the Defendant had withdrawn the offer to pay severance. The notice was clear that no severance was being offered and, again, Ms. Ciric had not altered her position with the Defendant prior to the withdrawal of the offer since she had simply continued performing her job. The action was dismissed.