By Stephen Dugandzic
In the case of Timmins v Artisan Cells, 2024 ONSC 7123, the Ontario Superior Court of Justice addressed the issue of an employer repudiating an employment agreement by failing to fulfill its contractual severance obligations.
Background:
Dr. Nicholas Timmins commenced employment with Artisan Development Labs Inc. (ADL) in November 2019 as Vice-President, Cell Technologies, and Entrepreneur in Residence. He was later promoted to Executive Vice-President in March 2021 and subsequently to Chief Development Officer in August 2021, overseeing ADL’s Canadian operations through its subsidiary, Artisan Cell Labs Inc. (ACL). His compensation package included a base salary of $475,782 CAD, along with stock options, an annual bonus, and comprehensive benefits.
Timmins’ employment agreement stipulated that, in the event of termination without cause, he would be entitled to the greater of three months’ notice or his minimum statutory entitlements under the Employment Standards Act, (Ontario). However, upon his termination without cause on March 3, 2023, ADL and ACL provided only one week of termination pay, significantly less than the contractual three months’ severance or the three weeks’ notice required by the ESA. Furthermore, they made additional severance contingent upon Timmins signing a broad release containing non-disclosure and non-disparagement clauses.
Court’s Analysis and Decision:
Justice Callaghan found that the employers’ actions—failing to pay the agreed-upon severance and imposing additional conditions not stipulated in the employment agreement—demonstrated an intention not to be bound by the contract, thus constituting repudiation. Consequently, the termination provisions of the employment agreement were deemed unenforceable, entitling Timmins to common law reasonable notice.
Considering factors such as Timmins’ age (44), length of service (3.5 years), senior executive position, and the specialized nature of his work in the gene therapy field, the court awarded him nine months’ notice, amounting to $456,908.82 in damages. The court declined to award punitive damages, noting that the substantial compensatory award served as sufficient deterrence.
Key Takeaway:
This decision underscores the critical importance for employers to adhere strictly to the terms of employment agreements upon termination. Attempting to impose additional conditions or withholding contractual entitlements can lead to a finding of repudiation, thereby exposing employers to greater liability under common law notice provisions.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018.