Duty of Good Faith Owed to Employees?

The Supreme Court of Canada opined in the well know decision of Bhasin on the implied duty of good between contracting parties.  The case was not a pure employment law case – but it likely impacts employment relationships.

Recently, the Supreme Court of Canada granted leave in a case from the Nova Scotia Court of Appeal.   The issue in this case was the employee’s entitlement to approximately $1 million pursuant to a long term incentive plan.  Mr. Matthews alleged and was awarded 15 months’ notice at trial for constructive dismissal. The long term incentive plan provided that if the employee was actively employed as at the date that the company was sold, he would have been entitled to the payment (as the company was sold approximately 13 months after his last day of employment).  The incentive plan stated that no amount would be paid (on sale) should the employee no longer be employed due to termination or resignation prior to this event. The trial judge found in the employee’s favour. That decision was reversed on appeal with a single judge dissenting. The dissenting judge relied heavily on the Bhasin decision to find in favour of the employee (¶164-168) and held as follows at ¶168:

“Justice Cromwell in Bhasin suggests that a party to a contract is entitled to assume that the contract will be performed honestly.  Neither party should be able to rely upon lies, deceit and manipulation to deny the other side of the benefits of the contractual relationship, even if that was not the primary goal of the party acting dishonestly.  The hearing judge did not find that Ocean acted to intentionally deny Matthews’ entitlement to the LTIP benefits, but my colleague

says a consequence of Emond’s action, which resulted in Matthews leaving, was the loss of the LTIP benefits. I am satisfied Emond’s actions are the type of dishonesty contemplated in Bhasin, and Ocean should be held liable for damages sustained by Matthews as a result of Emond’s dishonesty.”

We will follow this case at the Supreme Court and may provide updates once this case has been heard and a decision has been rendered.

1Bhasin v Hrynew 2014 SCC 71 https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/14438/index.do

2Matthews v. Ocean Nutrition 2019 CanLII 5975 (SCC)
https://www.canlii.org/en/ca/scc-l/doc/2019/2019canlii5975/2019canlii5975.html?searchUrlHash=AAAAAQAeIm9jZWFuIG51dHJpdGlvbiIgYW5kIG1hdHRoZXdzAAAAAAE&resultIndex=7

Ocean Nutrition v. Matthews 2018 NSCA 44
https://www.canlii.org/en/ns/nsca/doc/2018/2018nsca44/2018nsca44.html?searchUrlHash=AAAAAQAeIm9jZWFuIG51dHJpdGlvbiIgYW5kIG1hdHRoZXdzAAAAAAE&resultIndex=4