Employer cavalier about employee’s rights

The amount of severance pay was unconscionable because the employee was ignorant of her legal rights

After 3.5 years working as the marketing director with Digital Rez Software Corp., Denise Lambert’s employment came to an end. Ms. Lambert was responsible for creating advertising and promoting the company which she did by preparing multi- media publications for potential customers.

During her tenure with the company Ms. Lambert’s duties expanded and her wages increased. She was promised long-term secure employment and that she would be paid a bonus based on the performance of the company.

Towards the end of her employment, Ms. Lambert began receiving less and less work. On June 10, 2000, she was informed that she was being laid off. She did not want to be laid off and told the president of the company that she would rather get it over with and be terminated so that she could receive severance pay.

Approximately one week later Ms. Lambert was given termination papers and was told that she was entitled to 3.5 weeks’ of severance pay in lieu of notice, pursuant to the Employment Standards Act. She received a cheque for $2,596.16, which she cashed. At that time she made no objection to the amount of severance pay received.

Six months after her employment ended Ms. Lambert commenced an action for wrongful dismissal. In her claim Ms. Lambert alleged that her employer told her that she was entitled to 3.5 weeks’ notice and that she did not know that she might be entitled to more. When she learned that she might be entitled to more severance she commenced the action.

The issue before the Court was whether Ms. Lambert agreed to accept 3.5 weeks’ pay in lieu of notice. The Court was satisfied that she did not make a contract to accept the severance offered in full satisfaction of her legal rights.

Both parties were aware that Ms. Lambert was entitled to severance pay. When the time came to pay it, the company simply informed her that she was entitled to 3.5 weeks’ in lieu of notice. She did not respond to the company’s statement. There was no discussion or meeting of the minds by which Ms. Lambert accepted the 3.5 weeks’ pay as full satisfaction for giving up her legal rights to commence an action.

The Court held that there was no contract because Ms. Lambert neither accepted nor rejected the terms of the severance. She did not put her mind to the issue. Even if there was a contract, the Court held that it was unconscionable. Previous case law has set out the elements for a finding of unconscionability. The evidence must show that:

1) there is an inequality of bargaining position arising out of ignorance, need or distress of the weaker party;

2) the stronger party has unconscionably used a position of power to achieve an advantage; and

3) the agreement reached is substantially unfair to the weaker party or sufficiently divergent from community standards of commercial morality that it should be set aside.

In this case there clearly was an inequality of bargaining power. Ms. Lambert was ignorant of her rights in law. With respect to the unconscionable use of bargaining power, there is no requirement of malice on the part of the employer. It can be met if the employer is reckless or cavalier about the rights of its employee.

Here the employer told Ms. Lambert what she was getting by way of severance. There was no attempt to have a discussion about the appropriate amount. The employer imposed its will on Ms. Lambert, who was ignorant of her rights.

The agreement was substantially unfair to Ms. Lambert because what she received was substantially less than she was entitled to at common law. The Court held that Ms. Lambert would be entitled to three months’ notice or approximately $10,000.

Having found that there was no contract, or alternatively, that the contract was unconscionable, the Court held that Ms. Lambert was entitled to three months’ salary in lieu of notice.

For more information:

Lambert v. Digital Rez Software Corp., 2002 BCSC 481.

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