Employment Contracts – The pen is always mightiest
Are you dreaming of becoming the president of a company? Or is it your goal to purchase a small business and finally become your own boss? Jim Maizis pursued this goal when he left his full time job to buy Chatten’s Better Hearing Service, a small hearing aid provider in Oshawa, Ontario.
New to the business, Maizis needed a company veteran to help him with the transition. Dawn Loyst was the perfect fit. She had worked for the former owners of Chatten’s for nearly nine years and she knew the ins and outs of its business. But she came at a high cost to Maizis.
Loyst wanted a five year guaranteed job with a 15% ownership stake at the end of those five years. Maizis agreed and a short letter was signed confirming the deal. This letter had the same effect as an employment contract although employment contracts usually provide the employer with the explicit right to end the contract with some form of notice. However, Loyst’s agreement was silent on this point, which meant Maizis could only fire her by paying her until the end of the five year term.
Although their relationship started out well, Loyst and Maizis grew increasingly uncomfortable with each other over time. Matters boiled over during a telephone call when Maizis accused Loyst of hanging up on him and Loyst later declared that she “had a problem” with Maizis. This was the final straw for Maizis and the next day he gave her a reduced role and compensation. When Loyst protested, he told her to pack up and leave.
Believing that she was terminated, Loyst sued not only for the remaining 29 months of pay under the contract but for the value of 15% of the company. Maizis tried to wiggle out from the agreement by claiming first that Loyst had resigned and later that there was cause to fire her because of misconduct. Neither argument was successful and Loyst was awarded over $250,000.
Loyst achieved success by following the most important rule in workplace law: get key agreements in writing. Had her five year guarantee and 15% stake in the company been based solely on a handshake, the outcome would likely have differed.