By Graeme McFarlane

Many businesses have experienced the loss of a valuable employee.  Some are fortunate enough to have that employee return to the fold after venturing out into the unknown.  A recent case, however, illustrates some of the risks associated with returning a departed employee.  If not done properly, the company could face significantly increased exposure should that renewed relationship not work out.

Beware the Grand Return
In Cheong v. Grand Pacific Travel & Trade (Canada) Corp. 2016 BCSC 1321, the company’s director of sales and marketing left after over 10 years of employment.  Over a year later, one of the company’s principals invited her to return.  She ultimately accepted this invitation and rejoined the company in her former position, although she was focusing on a different market segment.  The company did not do a very good job in documenting the employee’s return to work.  The employee did not perform as expected, and ultimately, two and a half years later, she was dismissed on a without cause basis.

During the employee’s previous stint, the company adopted an employee handbook.  One of its terms purported to limit the amount of notice or pay in lieu of such notice that was due to employees if their employment was to be terminated on a without cause basis.  It was the legal effect of this clause that was the focus of the litigation.

The Short and Long View
Normally, if an employee resigns and spends a significant period of time away from the company, the employment relationship would start afresh, should that employee rejoin the company.  However, in this case, the employee claimed that the employer had agreed to recognize her previous service and she had sent an email purporting to confirm that agreement.  The company did not respond to this “confirmation” email, and as a result, the court held that the employee’s service for termination purposes was comprised of both the historical component and the short period following the employee’s return.

The Court then embarked on an examination of the of the termination provision contained in the employee handbook.  The Court adopted the reasoning of a fairly old case in Rahemtulla v. Vanfed Credit Union  (1984), 51 BCLR 200.  The judge in that case held that the contractual force of a policy will depend on whether the usual elements of a contract have been established: offer, acceptance, consideration ,and an intention to be bound.

The Importance of Employee Communication
Unfortunately for the employer, it did not bring the policy handbook to the attention of the employee when she re-joined the company, nor was it mentioned in the re-hiring discussions.  As a result, the Court could not find that there was offer or acceptance with respect to the handbook at the time of the re-engagement.  The Court then turned to whether the handbook formed a part of the legal relationship before the employee left the company some 12 years earlier.  For a number of reasons the Court concluded that it did not.

First, the court held that there was no evidence that the employee had agreed to the implementation of the termination provisions during her prior service.  Although the policy was announced by the company, it took no steps to ensure that the employees had received it and agreed to the terms.  This could have been done by an acceptance form, but it was not.  Accordingly, the policy’s implantation failed the first part of the Rahemtulla test.

Practice (and Communicate) What You Print
Second, and perhaps more importantly, no consideration was given when the handbook was first implemented.  The Company argued that the handbook contained elements that provided employees with a benefit.  However, the court rejected that argument holding that the alleged benefits were discretionary in nature and therefore did not constitute proper consideration.

As a result, the Court held that the employee was entitled to a common law notice period and awarded her damages equal to 14 month’s notice less amounts she received in mitigation.  This amount was far greater than the two  week’s pay in lieu of notice she was entitled to receive under the termination policy.

This case highlights the importance of properly documenting the agreement when hiring an employee.  Had there been an offer letter, and had the employer provided the policy handbook as part of the terms and conditions of employment, it is very likely that the decision in this case would have been reversed.  It also provides guidance on how to implement policies during employment, and highlights the importance of providing proper consideration when implementing policies that could affect employees.  Unfortunately, for this employer, the devil was certainly in the details.

Graeme McFarlane is a partner at Roper Greyell LLP, a firm focused on partnering with companies to find solutions to workplace issues.

(PeopleTalk Fall 2016)