Court clarifies legal principles in wrongful dismissal claims

In the recent Quach vs. Mitrux Services Ltd. decision, the BC Court of Appeal clarified three important legal principles in wrongful dismissal claims related to:

1) how employers can modify employment contracts;

2) whether employees on fixed-term contracts are entitled to damages equivalent to the balance of the term if wrongfully dismissed; and

3) when aggravated damages for unfair or bad-faith conduct or emotional upset will be awarded.

The facts

In this case, Tri Quach and Mitrux Services Ltd. signed a one-year, fixed-term contract. One month later, Mitrux asked Quach to sign a month-to-month contract in place of the fixed-term contract. At this stage Quach had already left his previous job. Quach initially refused to sign the new contract but ultimately agreed after Mitrux insisted.

The new month-to-month contract was terminable upon four weeks’ written notice or payment of one month’s salary in lieu of notice. On Quach’s insistence, the month-to-month contract included a term that said that any failure to comply with the terms of the agreement or misrepresentation by Mitrux would void the entire agreement.

Prior to his start date, Mitrux terminated Quach without cause. Quach sued for damages for wrongful dismissal and sought damages for the full year of unpaid wages. Mitrux argued that the month-to-month contract governed, and therefore one month’s pay in lieu of notice was appropriate.  After losing at BC Supreme Court, Mitrux appealed the decision to the BC Court of Appeal, which made the following findings.

Modification of contracts

The trial judge found that the month-to-month contract failed for lack of fresh “consideration” for the changes that Mitrux tried to impose. The Court of Appeal agreed, reaffirming the principle that a modification of a pre‑existing contract will not be enforced unless there is a further benefit to both parties. In this case, Mitrux attempted to replace the first contract with one that was more favourable to Mitrux, and less favourable to Quach. The second contract purported to provide fresh consideration because Mitrux agreed to waive the “probationary requirement” as set out in the Employment Standards Act. However, the Employment Standards Act establishes a floor of standards, not a requirement that there be a probationary period. There was therefore no consideration at all.  

Mitrux also argued that its commitment to pay $1,000 to reimburse the legal fees incurred by Quach in creating the fixed‑term contract was sufficient consideration. However, the trial judge found that the terms of the second contract had not been settled when Mitrux offered to reimburse Quach $1,000. The Court of Appeal agreed that the evidence on this point was vague.

Aggravated damages

The Court of Appeal began by reiterating the test for aggravated damages, which required a finding that Mitrux engaged in conduct during the course of dismissal that was unfair or in bad faith, and a finding that the manner of dismissal caused Quach a serious and prolonged disruption that transcended ordinary emotional upset or distress.

Mitrux argued that contrary to the finding of the trial judge, the second criteria had not been met. The Court of Appeal agreed. There was no indication that Quach’s feelings of strong dismay and anxiety for himself and his family were beyond the “normal distress and hurt feelings” of job loss that are not compensable. On the contrary, Quach appeared to recover quickly from his loss of the position. He found new employment soon after he learned he would not be starting work with Mitrux.

Are new earnings deductible from damages?

The Court of Appeal then considered the trial judge’s award of damages. The judge made no deduction for post‑dismissal earnings. After reviewing the applicable law in B.C., the court concluded that the fixed‑term nature of a contract did not entitle Quach to damages in the full amount of unpaid wages for the balance of the term without deduction of monies earned elsewhere during the term, absent a contractual provision that says otherwise.

Tips for employers

Quach vs. Mitrux Services Ltd. is a helpful decision that clarifies the law in several key areas. Employers now have certainty that mitigation will be taken into account in cases involving wrongfully dismissed employees on fixed-term contracts unless the contract provides otherwise. The case also serves as a helpful reminder to employers to:

•ensure that a modification to an employee’s contract contains a benefit for the employee;

•act fairly and in good faith when dismissing employees and avoid conduct that will cause employees an unnecessary emotional upset; and

•note that employees who are dismissed before their start date may still be entitled to wrongful dismissal damages. •

While every effort has been made to ensure accuracy in this article, you are urged to seek specific advice on matters of concern and not to rely solely on what is contained herein. The article is for general information purposes only and does not constitute legal advice.

Sarah Blanco is an associate at Roper Greyell, practising in employment and labour law with a focus on injunctions, wrongful dismissal claims and labour grievances in the workplace.