In a recent BC Supreme Court decision, a 50-year-old electrical engineer was dismissed without cause by the purchaser of the company shortly after the sale of the business. The employee had entered into an agreement with the new owner that, in the event he was terminated, his service with his previous employer would be recognized in determining his notice entitlement. When the new owner terminated his employment, the employee received severance and signed a release in favour of the new employer. However, the amount of severance he accepted did not compensate him for all of his past service with his former employer. He then sued his previous employer for compensation in lieu of the additional notice he believed he was entitled to under the common law.
The Court found that where the sale of a business occurs, it is an implied term in the contract of employment that the purchaser credit employees’ past service with the vendor for the purposes of notice of termination. This implied term can be negated by an express term to the contrary. In this case, the employee had the right to sue the new employer for wrongful dismissal taking into account all his past service with the vendor based on his express agreement with the purchaser.
The Court also found that an employee does not lose the right to sue the vendor for wrongful dismissal based on service with the vendor just because he has the right to sue the purchaser for notice based on his service with the vendor. The duties of both the vendor and the purchaser to provide an employee with reasonable notice of dismissal are independent of one another. The vendor’s obligation to provide the employee with notice of termination arose as a result of the sale of the business, which caused a breach of his employment contract. The purchaser’s obligation to provide the employee with notice of termination arose as a result of his termination by the purchaser shortly after the purchase and sale of the business.
In the result, the Court concluded that the fact that the employee had the right to sue the new employer for reasonable notice did not preclude him from suing his previous employer for reasonable notice as well.