Tsai v. Atlas Anchor Systems (B.C.) Ltd. Date:, 2016 BCPC 406

Citation: Tsai v. Atlas Anchor Systems (B.C.) Ltd. Date: 20161205 2016 BCPC 406 File No: 16-54513 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA (Small Claims) BETWEEN: JACK YI YO TSAI CLAIMANT AND: ATLAS ANCHOR SYSTEMS (B.C.) LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE R. HARRIS Appearing in person: Jack Tsai Counsel for the Defendant: Edward L. Montague Place of Hearing: Vancouver , B.C.

Date of Hearing: September 20, 21, 2016 Date of Judgment: December 5, 2016 Introduction [ 1 ] This case is about the enforceability of a termination clause contained in a contract of employment. [ 2 ] When the defendant company hired the claimant, the parties entered into an employment contract that contained a termination clause. After several years the claimant’s employment was terminated and the defendant paid 7 weeks’ severance in accordance with the termination clause. [ 3 ] The claimant argues the termination clause is unenforceable and he is entitled at common law to payment in lieu of reasonable notice.

His argument is based on the fact that the, termination clause refers to the notice provisions found in the Employment Standards Act, 1996 R.S.B.C. c. 113 (“ ESA”) and because he is a professional engineer, that he is exempted from the Act and therefore, the termination clause is unenforceable. [ 4 ] If the above argument is not successful, the claimant argues when he received his professional engineering designation that his duties changed to such a degree that the substratum of the employment contract changed with the result that the termination clause is no longer binding. [ 5 ] The defendant argues that provisions of the ESA can be referentially incorporated into the employment contract and therefore the termination clause is binding.

The defendant also argues that any changes in the claimant’s employment were incremental and not significant enough to find that the substratum of the contract changed. [ 6 ] Finally, and if the termination clause is not binding, the defendant argues the claimant failed to take reasonable steps to mitigate his damages. Issues [ 7 ] This Court must decide if the termination clause is binding.

If the Court finds that it is, then the Court must determine if the substratum of the contract had changed to such a degree that the contract is no longer binding. [ 8 ] If the Court finds that the termination clause is not binding, then it must determine what would be reasonable pay in lieu of notice and if the claimant took reasonable steps to mitigate his damages. Background [ 9 ] In 2008, the claimant graduated with a degree in Integrated Engineering from The University of Western Ontario.

Shortly thereafter, the claimant was hired as an Engineer Assistant by the defendant, Atlas Anchor Systems (B.C.) LTD. [ 10 ] When the claimant was hired, the defendant presented him with a contract titled, “Employment Contract” (the “contract”). On June 12, 2008, the claimant signed the contract. Prior to signing the contract the claimant had a full opportunity to consider it.

He also had the opportunity to seek legal advice but he chose not to. [ 11 ] The contract indicated the position being offered was: “Engineering Assistant - Head Office.” A brief description of the principal job responsibilities was attached and formed part of the contract. [ 12 ] The contract also contained a provision regarding termination. This provision reads: TERMINATION: Until successful completion of the probationary period, the Employer shall be entitled to terminate your employment for cause at any time without notice or payment of compensation in lieu.

In addition, after completion of the probationary period, the Employer may terminate your employment at any time without cause by providing you with such notice or severance pay as may be required by applicable Employment Standards Legislation. You expressly agree that the Employer shall be under not further obligation to you. You also agree to provide at least four (4) weeks advance notice of your intention to resign.

Another clause in the contract reads: Atlas Anchor Systems (BC) Ltd. (“Employer”) reserves the right to make reasonable job changes to your job responsibilities from time to time to accommodate its business needs. [ 13 ] The claimant’s responsibilities involved: going to job sites, writing reports, performing product testing, attending Canadian Standards Association (“CSA”) meetings, doing calculations, performing the function of safety officer, making purchase orders, research and development, operating computers and machines, driving fork lifts and helping with warehouse inventory control. [ 14 ] In April 2013, the claimant received his Professional Engineer’s designation.

When this occurred, Mr. Bryan Robinson sent a letter to the claimant. The letter set out the claimant’s duties as follows:

Continue to be responsible for research and development of current and new products within Atlas. Accept specialized project engineering responsibilities within Atlas. Accept responsibility for the review of fabrication drawings and calculation with other engineers.

Report directly to the undersigned. [ 15 ] The letter confirmed the claimant would receive a salary increase to $70,000 and there was a recommendation that he purchase Errors & Omissions Insurance with the cost being his responsibility. [ 16 ] With respect to the salary increase, evidence in the defendant’s book of documents satisfies me that the increase was $18, 000 over the claimant’s previous annual salary of $52, 000. [ 17 ] Once the claimant received his designation his duties changed. He no longer went to job sites, nor did he prepare reports.

He stopped being involved in work place safety, and he started leading research and development. He approved reports and drawings and he confirmed calculations. He went to management meetings and he started representing the defendant in the development of standards with CSA. [ 18 ] After 27 months as a professional engineer, the defendant terminated the claimant’s employment without cause.

The defendant paid the claimant in accordance with the termination clause which was calculated to be 7 weeks’ pay. [ 19 ] In cross-examination the claimant was challenged over what he identified as being his new responsibilities. One of the areas where he was challenged was whether or not he supervised others.

I took from his answers that he did not supervise others in the sense that he set their employment hours, or dealt with their leave, rather, he simply was one level of oversite and guidance for those working on or developing projects. [ 20 ] As for his job search, the claimant produced in excess of three hundred emails that he sent with his resume to prospective employers. In cross-examination the defendant highlighted aspects of the claimant’s job search including, the changes to his resume, and that he was applying for jobs for which he was not qualified. [ 21 ] Mr.

Daniel Chen, the corporate president of the defendant company testified for the defendant. Mr. Chen had worked for the defendant from 2002 - 2006 and then he resumed working for them in 2015. [ 22 ] According to Mr. Chen even professional engineers are required to do calculations. He mentioned that they do not do all of the calculations but they still must perform the calculations for verification purposes. He also confirmed that the claimant was involved in the certification, design and guidance associated with a project at UBC.

He was unsure about other projects that the claimant may have been involved in. [ 23 ] Mr. D’Sa, the controller of the defendant company testified. He has been with the company since April 2009. His duties include payroll, health and safety, inventory and costing. He had some knowledge of employment contracts that were kept in the personnel files. [ 24 ] Mr. D’Sa confirmed the claimant’s salary increases. As for the claimant’s work, he testified that prior to the claimant receiving his professional designation that the claimant had responsibility for research and development, costing, and inventory. Mr.

D’Sa could not recall what type of engineering functions the claimant performed. [ 25 ] According to Mr. D’Sa, once the claimant received his professional designation, the responsibilities of health and safety, costing, and inventory were passed to others and the claimant assumed the role of signing off on drawings and projects. Mr. D’Sa testified that the claimant was not a direct supervisor and he did not have people reporting to him.

Does the incorporation of the ESA notice provisions render the termination clause unenforceable? [ 26 ] The claimant asserts the termination clause is not enforceable because of the reference to the ESA . He argues the ESA does not apply to engineers and therefore the defendant cannot rely on the termination clause for the calculation of what is reasonable pay in lieu of notice. [ 27 ] The defendant responds by arguing absent unconscionability, an employment contract can, by reference, incorporate provisions of the ESA even if the profession involved is one that is exempted from the ESA. [ 28 ] In U.B.C. v.

The Association of Administrative and Professional Staff on Behalf of Bill Wong, 2016 BCCA 491 , it was argued that an accountant was by profession exempted from the ESA and therefore the incorporation of the ESA notice into his collective agreement resulted in the provisions not being enforceable and therefore he was entitled to the common law period of pay in lieu of notice. [ 29 ] In dealing with the matter the Court, agreed with the reviewing chambers judge who stated at paragraphs 34-35: [34] I agree with the conclusion of the chambers judge that a plain reading of

Article 9.3.1 is that the provisions of the ESA providing for notice or pay in lieu of notice are incorporated into the contract in issue. The effect is that the language of the ESA concerning notice or pay in lieu of notice is part of the contract. It is as if the draftsman included the words either in the text of or as a

schedule to the contract. [35] The chambers judge described the result as “... binding the parties to such statutory provisions”. Insofar as these words are merely

descriptive of the text included by reference in

Article 9.3.1, they are accurate, but the incorporation by reference in this case does notinvolve an acceptance of any part of the substantive content of the ESA. [30] In Brown v. Utopia Spas and Salons Ltd., 2014 BCSC 1400, the court commented specifically on the incorporation of ESAprovisions into an employment contract and stated at paragraphs 17 - 18: [17] Absent unconscionability, an employer can make contracts with employees that “referentially” incorporate the minimum noticeperiods in the ESA.

Such contractual notice provisions are enough to displace the presumption that the contract is terminable withoutcause only on reasonable notice. Machtinger at 1004-1005. See also: University of British Columbia v. Wong, 2006 BCCA 491 [UBC]. [18] The principle of legislative

interpretation which holds that material incorporated by reference into a statute or regulation becomesintegral to the instrument that incorporates it applies also to contracts and other instruments: UBC at para. 29, citing R. v. Sims, 2000BCCA 437 at para. 20; UBC at para. 30 citing R. v. St. Lawrence Cement Inc. (2002), (ON CA), 60 O.R. (3d) 712,162 O.A.C. 363; UBC at para. 31. [31] The above authorities are binding on this Court. As such, I conclude, the contract properly incorporated provisions from theESA and that the parties agreed to be bound by these terms.

Accordingly, and there being no evidence of unconscionability, I find thetermination provision enforceable. Has the substratum of the employment contract fundamentally changed such that the Termination Clause has been renderedunenforceable? [32] The claimant asserts the changes to his employment responsibilities were substantial, thus, changing the substratum of thecontract and rendering the termination clause unenforceable. [33] The defendant argues changes to the claimant’s responsibilities were expressly set out in the contract signed by the parties.

Assuch, the parties agreed to being bound by the termination clause despite changes to the claimant’s responsibilities. [34] In considering the issues, the defendant argues the claimant’s evidence is lacking in credibility and should not be accepted. Some of the concerns raised by the defendant are: It was not believable when the claimant testified that he did not look at his pay stubs. In his resumes the claimant overstated his duties and responsibilities by stating he supervised a number of people. The claimant avoided questions relating to his business partnership.

The claimant was not believable when he suggested that he did not understand the contract or appreciate the Termination Clause wasreferencing the ESA and not some other legislation. [35] I have carefully considered the claimant’s evidence and although there are a few areas that cause the Court some concern thoseareas are minor and explained contextually. For example, on the issue of supervising, I accept the claimant was not a supervisor in thathe did not

schedule work hours, approve leave and monitor all aspects of an employee’s work. However, I accept, from the claimant’sperspective, he did oversee work that was done on projects and in this regard one could conclude he did some oversite and thus he waspartially a supervisor. [36] As for the claimant’s reluctance to discuss the partnership he formed and the work that was being done by the partnership, I donot see this as impacting his credibility.

From the evidence it appears the partnership was working on a product that would compete withthe defendant company and therefore he was reluctant to disclose any information. [37] After considering the entirety of the claimant’s evidence I found him to be generally credible and reliable. [38] In Schmidt v. AMEC Earth and Environmental Ltd. 2004 BCSC 1012, Madam Justice Gerow discussed how changes inemployment can impact an employment contract and at paragraphs 10 - 11 and 32 she stated: Significant changes in employment can render an employment contract unenforceable by the time of termination of employment.

Thesubstratum of the employment contract entered into at the time of hiring may have disappeared by the time of termination, or it may beimplied that the contract could not have been intended to apply to the position ultimately occupied by the time of termination: Sawko v.Foseco Canada Ltd. (1987), 15 C.C.E.L. 309 (Ont. Dist. Ct.) … In Sawko, Trotter D.C.J. found that the employee's level of responsibility and corresponding status had escalated to the extent that theemployment contract no longer applied.

Although the agreement was properly signed and there was no duress of any kind exercised onor over the employee the agreement applied to a fledgling engineer. Nothing was said of the agreement until a dispute arose. There had

been a dramatic change in the plaintiff's position since the time the contract was entered into. As a result the substratum of theemployment contract entered into at the time of the original hiring had disappeared and it could be implied that the contract would nothave been intended to apply to the position the plaintiff was in at the time of his termination. … In my view, it was incumbent on the defendants to advise Mr. Schmidt that they intended to continue to rely upon the terminationprovision set out in the Agreement when substantial changes in his employment occurred.

This would have allowed him to consider thematter and to negotiate for other terms. If the defendants wished to continue to rely on the termination provisions there ought to havebeen a ratification of the provisions as the nature of Mr. Schmidt's employment changed. [39] A review of the authorities suggests the substratum of a contract will be eroded when there is a substantial or fundamentalchange in the terms of the employment. Incremental and predictable changes are insufficient to displace the provisions of a contract:Wernicke v. Altron Canada Corp., 2009 BCSC 1533, Miller v.

Convergys CMG Canada Limited Partnership, 2013 BCSC 1589,Schmidt v. AMEC Earth & Environment et l., 2004 BCSC 1012. [40] I agree with the defendant that the majority of the claimant’s employment tasks incrementally changed for the period leading upto the claimant obtaining his professional designation. I accept that when the parties entered into the employment contract that there wasan expectation that he would achieve his professional designation.

I cannot accept that the parties knew that this was going to happenbecause the process involved examinations and approval by a third party. [41] On all of the evidence, I find when the claimant received his professional status there was a substantial, sudden and fundamentalchange in the claimant’s employment and responsibilities. In this regard, he received a substantial pay increase. Further, it wasrecommended that he obtain errors and omission insurance.

Additionally I note; a notice regarding his professional designation was sentto all employees; the claimant was now accepting specialized project engineering responsibilities; the claimant now had theresponsibility for reviewing fabrication drawings and calculations; the claimant was now attending management meetings; he was nowrepresenting the defendant at CSA meetings and contributing to setting standards; he was no longer doing site reports; and although hiswork in research and development continued, he was now reviewing the work of others. [42] In

summary, I find on a balance the change in the claimant’s professional status and the changes in his employmentresponsibilities were substantial and more than reasonable job changes as contemplated by the contract. In fact, they were significantenough for the defendant to recommend that the claimant purchase errors and omission insurance. Accordingly, I am satisfied that thesubstratum of the June 12, 2008, employment contract was eroded and in the result, the termination clause is unenforceable and theclaimant is entitled to the common law calculation of pay in lieu of notice.

What is the period of notice that the claimant is entitled to? [43] Several factors are to be considered in determining reasonable notice. These factors include; character of the employment,duration of the employment, age of the employee and the availability of similar employment given the employee’s experience, trainingand qualifications: Schmidt v. AMEC Earth & Environment et al., 2004 BCSC 1012, at paragraph 37, Bardal v. The Glove & Mail Ltd.(1960), (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.J.) at 145. [44] The claimant is 30 years old. He was employed by the defendant for 7 years.

The claimant’s work with the defendant is theonly employment he has held since he graduated from university. The work involved the design of building anchor systems that areplaced on roofs of buildings and used for hoists and window washing platforms. The claimant has sent out in excess of 300 applicationsand he remains unemployed. [45] In Pechenkov v. Borg-warner (Can.) Ltd., [1983] 2 C.C.E.L. 237 (Ont. County Court), the plaintiff was 29 years old, he was anengineer and he had been employed by the defendant for 5 ½ years. His work was specialized in that they manufactured large pumpsand nuclear pumps.

The court concluded 9 months was a reasonable notice period. [46] The divergence between the instant matter and the Pechenkov case is the length of service. As such, and balancing all of thefactors, it is my view that the claimant is entitled to 10 months’ pay in lieu of notice. Did the claimant take reasonable steps to mitigate? [47] The onus is on the defendant to show that the claimant failed to mitigate by not undertaking reasonable efforts in order to findsimilar employment: Schmidt v.

AMEC Earth & Environment et al., 2004 BCSC 1012, at paragraph 50. [48] The defendant argues the claimant’s employment search was not reasonable. In this regard the defendant relied on evidenceshowing the claimant applied for some jobs that he was not qualified for. The defendant also highlighted the claimant’s resumeswherein under the heading, “Professional Experience”, the claimant listed his partnership first, rather, than his experience working withthe defendant.

Lastly, the defendant submitted that the claimant’s work in the partnership impacted the claimant’s job search. [49] Having considered all of the evidence related to the claimant’s job search, I am satisfied that he undertook a continuous andearnest job search. As for the deficiencies alluded to by the defendant, I observe that there is no exact science on how one searches for ajob and that the approach taken can and does vary according to the individual, the field of employment, the parties involved, and theemployee qualifications sought.

I also observe there is no evidence showing that the search undertaken by the claimant was soinadequate that it amounted to a failure to mitigate. [50] With respect to the claimant’s efforts to find alternative employment, he sent out over 300 letters to prospective employers andhe sought the assistance of other engineers. He tried to make contacts within the engineering community by volunteering at math events

and an event where graduating students met with prospective employers. I find the defendant has not satisfied the court that the claimant failed to mitigate his losses. Award [ 51 ] From the 9 months awarded, as a reasonable period of notice, the defendant has already paid 7 weeks in lieu, thus, a balance of 29 weeks remains outstanding.

Based on an annual salary of $70,000 this net amount is $39,038.46. [ 52 ] The claimant abandons any amount over $25,000, as such the award is $25, 000 with court ordered interest commencing September 15, 2015, with filing fees of $156.00 and service fees of $80.00. _____________________________ The Honourable Judge R. Harris Provincial Court of British Columbia