In a recent decision, the BC Supreme Court in Sui v. HungryPanda Tech Ltd. (2024 BCSC 1856) (“Sui”) struck down a termination clause due to lack of fresh consideration. In Sui, the employee, a general manager, was terminated after 18 months, and the court ruled that the termination clause in his employment agreement was unenforceable because HungryPanda (the “Employer”) failed to offer any new benefit in exchange for it.
The biggest takaway from Sui is that employers must offer fresh consideration everytime it seeks to introduce an amendment to the contract – some new “material advantage” – such as a raise, bonus, or enhanced benefits. Simply reiterating or formalizing existing obligations won’t suffice. Without fresh consideration, the new contract and the termination clause therein may be unenforceable.
The court in Sui also highlighted the importance of precision in drafting contracts. The employer in this case also made the blunder of referencing Quebec legislation instead of the BC Employment Standards Act. Any ambiguity in legal references can result in the clause being rendered unenforceable, exposing employers to common law reasonable notice obligations.
Another interesting part of the decision concerns the formation of an employment agreement – emails between the parties are sufficent in creating an employment agreement:
[44] In the present case, the emails of offer and acceptance contain all of the elements necessary to form an employment contract, including job title, place of employment, start date, salary, pay periods, equity (stock options) and three-month probationary term. Although some terms are absent, for example, vacation entitlement and a notice period in the case of without-cause dismissal, these are addressed either through statutory minimums (in the case of vacation entitlement) or by implying reasonable notice at common law: Machtinger at paras. 47-48.
For the employers, this ruling underscores the risk of poorly drafted employment agreements. Failure to provide fresh consideration or clear legal terms could leave employers facing significant liabilities in the event of a termination. Take note, review, and revise your employment contracts with care, and don’t recycle old contracts.
For the employees, do not despair if you have a termination clause in your signed contract. Sometimes the court will strike even the most well drafted termination clause. Also, don’t bother letting your employer know when they make these simple mistakes.
In this case, the Plaintiff was awarded $64,526.71 in damages, with a six-month reasonable notice period.
