In the case of Perretta v. Rand A Technology Corp.  O.J. No. 1486, the employee filed a summary judgment motion seeking $26,907 in damages for wrongful dismissal. She was a sales representative of the company, and her base salary was $46,500.
The employer terminated the employee’s employment without cause on March 31, 2020. The employment contract signed by the employee required that in the event of a termination without cause, the employee would be entitled to two weeks’ notice, or pay in lieu of notice plus the minimum notice or pay in lieu of notice, benefits and severance pay required by the Employment Standards Act, 2000.
Instead of simply providing her with the additional two (2) weeks and her entitlements under the ESA, the Employer demanded that she sign a full and final release as a condition of her receipt of her contractual entitlements. On April 1, and April 2, 2020, the employer sent two letters demanding that the employee sign a release in order to get the two (2) weeks of pay. The employee retained a lawyer who advised the employer that its treatment of the employee was in breach of its contract. The employer’s lawyer apologized and then the employer transferred the 2 weeks’ pay to the employee without the requirement for the signed release.
The employee argued, that the contract was repudiated, and the employer could not rely on their termination clause, and alternatively the termination clause was not valid.
The Court reviewed the test for anticipatory repudiation as follows:
The test is whether considering surrounding circumstances, including the nature of the contract, the motives which prompted the purported breach, the impact of the party’s conduct on the other party, a reasonable person would conclude that the breach party no longer intends to be bound by the contract with the result that the innocent part would be deprived of substantially the whole benefit of the contract.
In this case, the Court noted that instead of paying the employee the amount she was contractually entitled to, the employer presented her with an enhanced severance offer. It further noted that the release itself was broad in scope, indicating that the demand was not a casual or accidental slip. The fact that the employer made the demands on two different occasions was also indicative that it was not a mistake.
The Court determined that the employer repudiated the contract on the basis of failing to pay the amounts, and making multiple requests for a release was a repudiation. The termination clause was also determined to be invalid.
In considering this case, it is notable, that the Court determined that a repudiation occurred as the failure to pay the two (2) weeks substantially deprived the employee of the whole benefit of the contract. The employer also did pay the employee the entitlement, after it determined its error. While the employer was clearly wrong in this case to demand the release for a contractual entitlement, a finding that the entire contract was repudiated seems to be a harsh conclusion.
This is the second case which has dealt with repudiations of employment contracts in the last year, as a strategy by employee-side lawyers to increase access to reasonable notice by voiding the employment contract – the first being Humphrey v. Mene Inc.  O.J. No. 2476. It would appear that Courts are becoming more comfortable setting aside freely negotiated employment agreements due to any employer misstep. In our view, the appropriate result is enforcement of the contractual terms that were agreed upon, but to set aside the entire agreement is severe and results in an unfair windfall for employees. We will keep you advised if either of these decisions are appealed.