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A recent Alberta decision may make employers reconsider how they give notice that a fixed term employment contract will not be renewed. Geoffrey Thompson was hired as the Regional President, Calgary of Cardel Homes Limited Partnership pursuant to a fixed term contract of 2 years from September 2008 to September 2010. In September 2010, a new contract was entered into between the parties which reappointed him for a 13 month term from September 2010 to October 22, 2011.

A recent Alberta decision may make employers reconsider how they give notice that a fixed term employment contract will not be renewed. Geoffrey Thompson was hired as the Regional President, Calgary of Cardel Homes Limited Partnership pursuant to a fixed term contract of 2 years from September 2008 to September 2010. In September 2010, a new contract was entered into between the parties which reappointed him for a 13 month term from September 2010 to October 22, 2011.

This contract provided that:

Your employment pursuant to this Agreement may be terminated as follows:

(3) By Cardel in its absolute discretion for any reason other than cause, at any time by providing you with written notice to that effect, which notice shall provide for a termination date which is effective as of the date of the said notice, and without further obligation to you other than those obligations of Cardel set out in clause (4) below.
(4) Where your employment under this Agreement has been terminated by Cardel under clause (3), you agree and acknowledge that you shall be entitled to receive from Cardel, in addition to outstanding entitlements to unpaid Yearly Salary and outstanding vacation pay to the effective date of termination, as well as any pro-rated share of profit sharing that you are entitled to (see Profit Sharing section of the contract), your entitlements under the Alberta Employment Standards Code (“ESC”) for notice and or compensation in lieu of notice. Your entitlements under the ESC will be based strictly on the calculation of your “Yearly Salary” and will not include any further remuneration or quantification for benefits.
 
Additionally, you shall be entitled to receive a lump sum payment the (“Severance Payment”), of twelve (12) months base salary earnings. The “Severance Payment” will be calculated based on your “Yearly Salary” exclusively, and will not include any other remuneration or quantification for benefits. The total statutory notice and “Severance Payment” payable under this paragraph shall not exceed 12 months of “Yearly Salary” at the date notice of termination is provided.

On September 21, 2011, 1 month prior to the expiry of the contract, Cardel wrote Mr. Thompson, advising him that his contract would not be renewed after it expired on October 22, 2011. Further and most importantly, Cardel also advised Mr. Thompson that he would be relieved of his obligation to report to work for the following month, but that his compensation would continue as usual. He was required to return all property of Cardel, was removed from the e-mail system and others outside the company were advised by Cardel that he was no longer with Cardel.

Mr. Thompson alleged that his employment had been constructively dismissed via the letter of September 21, 2011 and in particular, the instructions for him not to attend at the workplace. He argued that his employment had been constructively terminated during the course of it and prior to its expiry and therefore pursuant to clauses (3) and (4) of his contract, he should be entitled to his Severance Payment of 1 year’s base salary, being $285,000.

The Court agreed with Mr. Thompson’s arguments. In doing so, it assessed whether a reasonable person in Mr. Thompson’s position as President would have felt that an essential term of his employment was being substantially changed when he was relieved of his duties one month before the end of his contract and was asked to return his keys, passwords, and leave the building and concluded that a reasonable person would have felt this occurred. As a result, the court found that Thompson was constructively dismissed on September 21, 2011 and entitled to treat the actions of Cardel as a repudiation of the September 2010 Agreement. Thompson was not simply given notice that his September 2010 Agreement would not be renewed; rather, he was terminated without cause.

This finding could have been avoided, had Cardel simply let Mr. Thompson carry out his duties and position for the remaining one month of the contract. They still could have advised him that his contract was not being renewed in September, but they erred in making substantial changes to his position during the term of the fixed contract.

Thompson v. Cardel Homes Limited Partnership, 2013 ABQB 353 (CanLII)

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