Terms of Contract are Binding

Date: 2007
Author: Daniel A. Lublin
Publication: Metro

Court “troubled” that important agreement hadn’t been reduced to writing

Madhu Suri must have been crestfallen.  Not only had he just lost his job, but he was told that the hefty severance agreement he thought he had negotiated was no longer an option.  But instead of simply ignoring his legal rights, Suri got himself a lawyer.
Suri had been a senior business manager for a number of companies when he met Riyaz Devji, who worked with B.C.-based North American Tea and Coffee Inc.  Devji had been looking for a new General Manager and Suri appeared to be the perfect match, believing his future with his current employer was limited.  The two discussed the possibility of Suri joining Devji’s company and eventually they agreed on a number of terms.  Among them was Suri’s right to receive severance pay if fired:  Suri would receive up to 18 months salary, if fired without cause.
Suri’s employment with NATCO was short-lived – as was the severance agreement he thought he had reached.  When Suri was terminated without cause, his severance was discussed with Devji, who later argued that Suri had agreed to a lesser package of only five months’ pay.
Five months later, with his salary continuance payments apparently coming to an end, Suri sent an email requesting an extension of “financial and medical support.”  NATCO refused to pay him any further, arguing that his agreement at the time of his termination had reduced his legal rights and, at trial, arguing that his email was indicative of the fact that an agreement had been reached.
The question of Suri’s entitlement to termination pay was recently left to a B.C. court to answer.  In rejecting NATCO’s argument that Suri had agreed to the lesser amount, Justice Hinkson noted that, having found the two men to have agreed to a severance period of 18 months, it simply made no sense that Suri would agree to any less.
Even though the court was “troubled” by the language used in Suri’s email, it found that the words he used were more diplomatic than necessary, concluding it was a result of his non-confrontational personality and the stance that Devji had taken.
Both employers and employees can minimize pay-based disputes by following these principles:

  • Replace a simple handshake by committing agreements to writing.
  • Ensure those agreements, especially contracts and releases, are legally reviewed prior to names being signed.
  • Take and then preserve notes of important conversations and events.  In rejecting Devji’s version of the facts, the court was troubled that he did not document the alleged agreement, especially because it was such a dramatic departure from the original agreement that had been made.