January 7, 2008
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Two employees at an aerospace firm attended a Town Hall meeting organized by the company to address employee concerns about job security and severance packages. Because the Employer feared that various key employees might decide to leave, it held the meeting to assure the employees that the company's past practice of paying one month's salary for each year of service would continue to apply to employees who were laid off in the future. The plan in effect at that time was to pay out severance as a lump sum, with no working notice beyond a few days for employees to finish up work. A company produced summary of the meeting noted numerous employee questions about the possibility that the severance policy might change in the future, and that management replied that "[w]e have been assured that the package will not change."

However, the Employer subsequently announced that the plant would be closing and that employees would be provided with working notice, the length of which would depend on the projects they were working on. The employees sued the Employer in the British Columbia Supreme Court, seeking lump sum severance payments based on their years of service in accordance with the assurances given by the employer at the Town Hall meeting. The Plaintiffs argued that the meeting constituted a unilateral offer that they had accepted by remaining in the Employer's employ. The terms of the contract were found in the past practice establishing that severance was paid to employees based on one month for each year of service, payable when they finished working, and separate and apart of their common law rights and of any working notice.

The Court agreed. It held that the Employer had entered into a binding contract to pay severance in accordance with past practice and that this contract applied to the shutdown of the plant. However only one of the Plaintiffs was eligible for the payment because the other had voluntarily left prior to his termination date. The Court found that:

"In this context it is reasonable to infer that the Defendant promised the employees, including the plaintiffs that the policy of paying severance equal to one month's salary for each year of service would continue to apply to any future layoff as an incentive for them to continue working for the company".

Consequently, the Court stated that the assurances given at the Town Hall meeting were intended to create legal relations and were not merely informational. The employees accepted the offer by continuing to work for the company and by neither terminating their employment or accepting voluntary layoffs. As such, so long as the employees stayed during the working notice period, they were entitled to receive the promised severance package. The moral of the story is beware of what you say at a meeting, it may just become a contract!

Kornerup et al. v. Raytheon Canada Ltd., 2007 B.C.S.C. 584.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law