Contributor, Trevor Thomas, lawyer.
What happens to my severance package if my employer is dissolved by statute? As abstract and unlikely as this question might at first glance appear, it was in fact recently considered by the British Columbia Court of Appeal in the case of Maxwell v. British Columbia.
Beverley Maxwell was employed by the former British Columbia College of Teachers (the body previously responsible for regulating the teaching profession in BC) as the Director of Certification from 1996 to January 2012. In 2010, her existing employment contract was replaced with a new one which contained a generous severance clause in the event her employment was terminated.
On January 9, 2012, the College was dissolved by the provincial government pursuant to the Teachers Act, and replaced by the Teacher Regulation Branch. When, in anticipation of the dissolution, Ms. Maxwell was offered employment with the new Branch, she declined. Instead, she sued the province and the College, claiming she had been fired and seeking enforcement of her 2010 severance clause or, alternatively, damages for wrongful dismissal.
At trial, the College’s lawyers argued that because it had been dissolved by statute, Ms. Maxwell’s employment had not been terminated and she could not enforce her contractual severance clause. The BC Supreme Court and the Court of Appeal disagreed, making two important findings:
- Dissolution = Termination. The Court of Appeal saw the situation as analogous to the termination of employment that occurs by virtue of an employer selling or otherwise disposing of its business. The Court explained that although the dissolution was not the act of the College, the legal effect was the same. Ms. Maxwell’s employment was terminated without cause, and though the College itself did not make the decision to terminate Ms. Maxwell’s employment, the government’s decision to dissolve the College amounted to the same thing.
- Government = Liable. Under the Teachers Act, the government was vested with the College’s right to end the employment relationship with Ms. Maxwell, but all of the liabilities and obligations of the College were also transferred to and assumed by the government. These obligations included Ms. Maxwell’s right not to be terminated without cause absent contractual compensation, and therefore, the government was responsible to compensate Ms. Maxwell for the loss resulting from her dismissal.
The Maxwell decision is a good example of “common sense” reasoning by the Court. The College’s position that Ms. Maxwell’s contractual rights disappeared on dissolution was not only legally unsound, it would have led to a fundamentally unfair result, essentially punishing Ms. Maxwell for events she had no control over.