eCaseNote 2014 No. 01

Silence CAN mean Consent: Employees should Speak Up on Changes resulting from New Business Ownership

Whittemore v. Open Text Corporation, 2013 ONSC 2339



The Ontario Supreme Court has recently affirmed that employment terms remain valid after a change in share ownership of a company. However, if an employee does not complain to the new employer about attempts to make adverse changes after the fact, then silence can constitute acceptance.

Facts

Whittemore started work as a software developer in 1994 with SoftArc, which was taken over by MC2 in 1999. He signed an employment agreement with MC2 with a termination provision that stated that he was entitled to four weeks’ salary in addition to his entitlement under the Ontario Employment Standards Act. The agreement also provided for a paid one-month sabbatical every five years. Whittemore’s salary and duties did not change, and his service with SoftArc was recognized in terms of seniority.
In 2002, the shares of MC2 were purchased by Open Text Corporation. Whittemore signed a new non-solicitation and non-competition agreement with Open Text but no new contract was signed. He was advised, however, that he would no longer receive the sabbatical benefit. His employment was ultimately terminated in 2011 on a not-for-cause basis.

Arguments

Whittemore sued for damages for wrongful dismissal arguing for more generous notice. The Court found in favor of Open Text and held that, since there had been a sale of shares – not assets – the employer’s obligations did not change and Whittemore 1999 employment contract remained valid.
Whittemore argued that Open Text could not pick and choose terms of his contract so as to eliminate his sabbatical benefit. The Court simply responded by citing the Ontario Court of Appeal’s 2008 decision in Wronko v. Western Inventory (affirmed in 2013 by the British Columbia Court of Appeal) that an employee must make it clear to the employer that he or she is rejecting new terms.

What this means

Open Text’s failure to address Mr. Whittemore’s sabbatical would probably have been seen as a breach of contract at the time. However, since Whittemore did not complain to Open Text about it, his silence constituted his acceptance of the changed term.
Two main points can be drawn from this case. Firstly, changes in shareholdings of a business will not normally affect the continuation of employees’ contracts. Secondly, if the new operator attempts to effect a change that an employee is unhappy about, he or she needs to speak up. The employer may then either accept the employee’s position or reject it, either by terminating with proper notice or offering a new contract.

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