By George Waggott, founder, and Roberto Fonseca-Velazquez, law student,
George Waggott Law
A recent B.C. court decision confirms the importance of following the correct legal steps when an amending executive employment contracts. In its decision in Sui v HungryPanda Tech Ltd., 2024 BCSC 1856 (CanLii), the Supreme Court of British Columba found that a modified employment contract was unenforceable because the company failed to provide fresh consideration in exchange for the agreement. As a result, the contractual termination clause was held to be unenforceable.
Mr. Xing (Vincent) Sui worked as the Canadian general manager for HungryPanda, a technology company which operates an Asian food delivery platform. After working for the company for approximately 18 months, the employer terminated him without cause. Sui proceeded to sue the company for wrongful dismissal, with a key issue in his legal case being whether or not he was bound by a contractual termination provision.
Throughout April 2021, the employer and Sui traded emails about potential employment with the company. This resulted in him being offered employment on April 23, 2021, with the employer setting out the salary, hours of work and details regarding stock options. The offer from HungryPanda also said the following: “After your confirmation we will provide you with an official employment agreement for your signature”.
Sui responded to the offer by asking if “there was any room to increase” the equity being offered. The company agreed and increased the value of the stock options component of Sui’s remuneration. This revised offer was then presented as being the best offer the company could make. Sui accepted this offer.
HungryPanda then provided Sui with a formal employment agreement which included a termination provision that sought to limit Sui’s entitlements to the minimum amount provided for in the B.C. Employment Standards Act.
In his lawsuit, Sui successful argued that the exchange of emails amounts to an employment contract which had been formed between the parties. All of the necessary terms of employment had been set out, including position, location, and compensation. The Court therefore found that the “official employment agreement”, which included terms which had not been discussed between the parties or set out in the relevant emails, amounted to a modification to an already-existing employment agreement.
The Court said that, on an objective review, a reasonable person would have considered the contract which would have been expected to be a formality, as opposed to a document which would contain new terms. As a result, Sui was able to successfully argue that the (second) employment contract was not enforceable because no fresh consideration had been provided to him by the employer.
In its analysis, the Court noted that there was no material advantage provided to Sui in exchange for him agreeing to the termination provisions or any other new terms in the agreement. As a result, the Court awarded Sui common law damages for wrongful dismissal. The termination provision that limited Sui to two weeks notice of termination was held to be invalid, and consequently Sui was awarded a six month notice period.
This decision highlights the perils associated with a practice of advising new recruits that “the contract will follow”. When an employer makes an offer of employment, it is invariably a mistake to do this – the best practice is to make a clear and comprehensive offer in one document, without attempts to retroactively modify or supplement the offer.
For more information about George Waggott Law, please see: www.georgewaggott.com, or contact: george@georgewaggott.com
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