Amendments to Employment Agreements: Be Careful or Be Sorry

In Bennett v. Sears Canada Inc., the Court of Appeal recently dealt with an interesting case involving a former employee claiming post-retirement health and welfare benefits.

In this case, Bennett was employed by Sears Canada Inc. which offered some of its employees such benefits upon retirement provided they qualified.  One of the qualifying requirements was that the employee “must retire from active employment with 20 years or more continuous full-time service”. 

Bennett began working at Sears on a part-time basis in October, 1977.  She did so until May, 1999 when she became a full-time employee.  Approximately 10 years later, Sears terminated her employment due to corporate restructuring.

As a result, during the 32 years that she had worked with Sears, she had worked on a part-time basis for about the first 22 years and on a full-time basis for about the last 10 years.

In 2005, four years before termination, she inquired of the Human Resources Department in the store in which she worked about her eligibility for pension-related retiree benefits.  That request was conveyed to an employee in the HR Service Centre at the Head Office of Sears in Toronto. 

The response came from Head Office in a July, 2005 e-mail that said:

“She would need 20+ to get – Group Life/Health & Dental/Discount Card.  At the moment, 28 years of service but due to her going from part-time to full-time, this is combined, and her total years service 17.153 years which means that she would need to retire in about 3 years to qualify for the benefits.”

Based on the plan requirement of 20 years’ full-time service, Bennett would have had to work until 2019 to qualify.  However, based on this e-mail, she would qualify for benefits in or about 2008.  As indicated, she worked until April, 2009.

After termination, Sears advised her that she did not qualify for benefits because she did not retire with 20 years or more full-time service.  She was told that the information had received in July, 2005 was mistaken.

She then commenced an Application asking for her rights to be determined.  The Application judge found that she was entitled to full pension benefits.  The Court of Appeal agreed. 

The Court ruled that in effect, Sears and Bennett had amended their contract with respect to benefits by converting her part-time employment years into the equivalent of a reduced number of full-time years.  That agreement was confirmed by the June 2, 2005 e-mail from the Head Office of Sears.  As such, the Court found that Bennett was entitled to have the contract performed, and dismissed the appeal. 

On the surface, there might well have been some significant question as to the consideration provided by Bennett for what was ultimately found to be an amendment to the contract as reflected in the Head Office e-mail.  Presumably, the answer is simply that Bennett continued to work for another three years and that represented consideration.  To me, that would be a bit of a stretch.  It is difficult to imagine that Bennett would not have continued to work with Sears regardless of the position taken by the Sears’ Head Office staff in 2005.  Similarly, one might well have questioned the authority of the Head Office representative who wrote the 2005 e-mail to essentially amend contractual terms binding not only on Bennett but also all of Sears’ other employees. 

Underlying the decision, perhaps, is something that experienced litigators see all the time.  The fact is that judges tend to be reasonable compassionate human beings who, when faced with a conflict between a large corporation and an individual, and particularly one who has been terminated from her employment in the latter stages of her working life after 32 years of loyal service, are going to take a very long and hard look at the situation before siding with the corporation. 

In the meantime, this case is instructive in terms of the need to maintain tight control over the manner in which HR staff communicates with employees. 

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