Michele Lancia was a 48-year-old, generously-paid Restorative Dental Hygienist. She worked for Park Dentistry for eight years (after 11 prior years for the dentist from whom Allen Park bought the practice). When she quit, she was receiving $59 per hour1, and 200 hours of paid vacation time annually.
Along with all the other staff, Ms. Lancia was presented with a new MBC contract. She received 18 months' working notice. Despite that, she signed her new contract a mere two days later and continued to work under it for 18 months.
On February 9, 2016, she submitted a resignation letter, implying she was unhappy about a relatively minor dispute (her vacation-pay calculation).
Three months later, Ms. Lancia's lawyers wrote to MBC claiming she was constructively dismissed and alleging, for the first time, that she was sexually harassed. As Justice Goodman noted in his Reasons for Judgment, at no time during her eight years of service with Dr. Park, nor even in her resignation letter, did Ms. Lancia allege harassment.
Among other things, her demand letter sought 18 months of compensation, relying on the common law notice period. However, her contract limited her to the statutory minimum notice, eight weeks. To avoid being bound by the contract, she claimed that it was unenforceable since the $2,000 she received as a signing bonus was more than offset by her losses under the new vacation-pay calculation method (based on actual hours worked, rather than, as before, the overestimate that she would work fully 40 hours weekly).
We responded that it was irrelevant that the new contract resulted in a net reduction in her compensation, even after the $2,000 signing bonus. It is, in fact, trite law that a Court will not inquire into the adequacy of consideration: "a peppercorn will do" is the legal phrase. The principle is sound as commercial and contractual affairs would grind to a halt (backlogging Courts even further) if Courts had to rectify every bargain with which one of the parties to it decided they were unhappy.
For fifteen years, MBC lawyers have been arguing with opposing counsel on behalf of doctor-employers, writing articles for medico-dental publications, speaking at conferences, and generally trying to tell anyone who would listen that employees can be transitioned to new contracts no matter how long they have already been employed, without "consideration" if the contracts and transition process are both done properly.
In the early years, MBC could generally make an employee demand go away with one, or at most two, letters to the employee's lawyer (showing them that the process is actually based on very fundamental legal principles and black-letter law). In fact, whether and how long they contested this issue often served as a litmus test of how knowledgeable and specialized the employee's lawyer was. Over time, employees and their lawyers have become increasingly aggressive and litigious. In the Lancia case, it required going all the way to Court. For the first time, a Superior Court3 has had occasion to review this exact issue in a dental practice and has agreed, giving judicial approval to these specific contracts and transition process.
This case illustrates that bullet-proof contracts not only minimize termination pay but also boost employers' negotiating positions. For example, if your employee sues you for something outside the contract (human rights, etc.) if your contract (including the transition process, the enforceability of the termination provisions, etc.) is not bullet-proof you will feel tremendous pressure to settle even if you know yourself to be completely innocent.
In Lancia for example, the damage award to which our client was realistically exposed given his contract was about $110,000 less than it would have been had he not had bullet-proof contracts. (That is the difference between the employee's entitlement to termination pay – had the judge found she was terminated – under her contract vs. at common law.) Because of the strength of his contracts, we were able to advise him with uncommon certainty that he would not be held liable for the common law termination pay. Without bullet-proof contracts, you would face the difficult choice between risking an additional $110,000 liability and never getting a public vindication of your reputation.
This case was helped considerably by the many years of text history Dr. Park still fortunately retained with his former employee. These texts were very important in the Judge's assessments regarding credibility and his ultimate conclusion that the parties had a friendly but professional relationship.
Dr. Park was wise, but sometimes clients delete texts, not realizing they may become important evidence. Other doctors panic, deleting delete messages they consider incriminating. Remember that, just because you delete texts, does not mean the other side does not still have them. Moreover, as your lawyers, we can help you much better if we know the case we need to meet.
Few people reading the above and many similar, effusive, "loving" texts from an ostensibly grateful employee would foresee that same employee turning around and suing that employer, making positively vicious allegations in so doing. We often speak to dentists who believe they have what the Court called in this case, "a close working environment, where people bantered and were comfortable together; colleagues who considered each other like a second family," [emphasis added].
The Court agreed with our submissions: the new contract presented to Ms. Lancia and the process by which we transitioned her were both legally enforceable. The Court dismissed her constructive dismissal and her sexual harassment claims. We were not only able to persuade the Judge that she was "not credible", he actually ordered the employee to pay our client $52,000 for his legal fees. Given how sympathetic to employees Courts generally are, this is a very significant victory for Canadian dentists.
To our knowledge, this is the first time a Court has ruled on the enforceability of staff contracts implemented in a dental practice mid-employment. Dr. Park has performed an invaluable service for his colleagues across the country as we now expect a dramatic reduction in employee claims against doctors (or at least those of whom have bullet-proof contracts).
1. Transitioning employees (no matter how long they have been employed) to proper, written contracts can be done, provided it is done properly.
2. New contracts do not require "consideration" if the process is done properly.
3. Bullet-proof contracts permit reducing the employee's compensation, and dramatically improving your terms as employer.
4. Transitioning all staff to bullet-proof contracts and policies will almost invariably more than pay for itself after just one termination or employee dispute.
5. Courts are capable of distinguishing between harassment and "a close working environment, where people bantered and were comfortable together".
6. Judicially approved contracts also improve your negotiating position, obviating the need to settle meritless cases.
7. Do not delete texts with staff. We need them to defend your case optimally.
8. Take care of your real family first: transition all staff to bullet-proof contracts and workplace policies.
1 This was 20% above the 2015 mean wage ($49.18) for Restorative Hygienists per ODHA "Employment and Salary Study". Ms. Lancia had told Office Manager, Maria Bucciarelli, that she had had an affair with the prior dentist (per the affidavits sworn by both Bucciarelli and Lancia). This raises an important (remarkably common) industry issue: a dentist buys a practice with an above-market-compensated employee because (as the buyer discovers post-closing) the employee was intimately involved with the seller. This is a typical reason that dentists first approach MBC wishing to improve their contracts.
2 The "bullet-proof" analogy is helpful; nothing can prevent someone from starting a lawsuit: they simply pay a filing fee. But an iron-clad contract, properly implemented–like a bullet-proof vest–dramatically reduces the likelihood the employer will suffer catastrophic injuries (a fortiori now that we have judicial approval for specific contracts in the dental industry.
3 We also recently won a similar case in Small Claims Court, dismissing the employee's claim and awarding costs to our client (about which we are currently writing an article).
Mariana Bracic (Founding Lawyer of MBC Legal and MBC Brokerage) is passionately devoted to protecting doctors and their valuable practices. She considers herself an employment-law nerd (having what her teenage daughter calls the "confused foreign exchange student" look since emigrating from Croatia as a child.) Her telephone: 905-825-2268; email: mbracic@mbclegal.ca.