How to get paid for a year and not work a day
In a recent case, a British Columbia man was awarded a year’s pay without ever working a day.
Sam interviewed for a job with a company. He was a very sought after candidate and already had secure employment. He received, however, a tempting offer. The job was to start a month later and would last for a year. The contract specifically stated that if Sam was terminated without just cause before the fixed-term contract was over, he would be paid for the rest of the year.
The job was going to pay $138,000 and Sam was sufficiently tempted. He signed the contract and gave his existing employer notice of his resignation.
About a week before he was to start working, however, it appeared the employer had second thoughts. It asked Sam to sign a new contract which could be terminated with only four weeks’ notice. Sam did not want to sign the new contract but he had already quit his old job. Ultimately, he agreed to sign it, hoping that things would work out and no termination would occur. A few days before Sam was to start, the company decided they had changed their mind altogether and did not want to employ him. They offered him four weeks’ pay in lieu of notice as per the second contract.
Sam quickly and desperately began looking for work and a few weeks later found a new position. He did not, however, accept the employer’s offer of four weeks’ pay but rather sued on the first contract.
At trial, the employer tried to argue that the second contract was binding. It was not.
In order for a contract to be binding there has to be “consideration.” You have to get something in exchange for signing the contract. When Sam signed the first contract, he got something. He got a new job and a guarantee of employment for at least one year. When Sam signed the second contract, he got nothing. He lost the guarantee of a fixed-year contract. No other raise or signing bonus was offered.
Sam was awarded the entire $138,000 without ever having to work a day.
The fact that Sam had already quit his old job by the time the new employer asked him to sign the second contract probably put the last nail in their coffin. If Sam had still had the option of staying in his secure employment he would have been making his own choice. He had, however, detrimentally relied upon the contract already signed by quitting. If Sam had had no job to quit he would still have a great argument but not nearly as iron clad. In the usual wrongful dismissal case, an employee is suing to say that based on their age, seniority and level of responsibility they should have received more advanced notice or pay in lieu of notice of their termination. The employee has an obligation to mitigate their damages by looking for a new job. If they do find a new job, the money they make will reduce their claim against the terminating employer. Lucky for Sam those concepts do not apply to fixedterm contracts. The employer wrote it. The employer guaranteed it. The employer owns it.
The company in this case may very well have received legal advice not to enter into any fixed term contracts because of these risks but decided to ignore the advice. A costly mistake.