In Timmins v. Artisan Cells, 2025 CanLII 2387, Ontario’s Superior Court of Justice found, in an undefended claim, that the employers “by their correspondence and actions” repudiated the employee’s employment agreement when they terminated his employment and failed to meet their obligation to pay him the contractual severance. The court held the employee was entitled to nine months’ common law notice (i.e., damages in the amount of $456,908).
Background
In 2019, the employee began his employment with an American gene therapy technology company, Artisan Development Labs, Inc. (ADL) as its Vice-President. In 2021, he was promoted to Executive Vice-President and built a team in Toronto, resulting in the formation of Artisan Cell Labs Inc. (ACL), a Canadian subsidiary of ADL, for which he then became responsible.
The employee’s compensation was comprised of an annual base salary of CDN $475,782, stock options, an annual bonus, and additional benefits. His 2019 employment agreement (Agreement) contained a termination provision providing that for termination without cause, the employee would be entitled to severance equal to the greater of three months’ pay, or his minimum entitlement under the Employment Standards Act, 2000 (ESA). When the employee was dismissed in 2023 on a without-cause basis, the ESA provided he was entitled to three weeks’ notice/termination pay; however, the employer offered him only one week of ESA termination pay, and additional severance, which would be withheld unless he signed a full and final release.
The employee claimed he had been negotiating a licence from ADL and ACL (the employers) for their gene editing technology, in exchange for 5% of a new company he would own. The employee claimed further that after his dismissal, the employers refused to negotiate the licence unless he signed a full and final release in exchange for their severance offer and that they offered an inferior licence to which the employee objected. There were no further negotiations.
Decision
Repudiation
The court found the employers, “by their correspondence and actions,” repudiated the Agreement when they terminated the employee and failed to meet their obligation to pay him contractual severance. The court held the employee was entitled to nine months’ common law notice (i.e., damages in the amount of $456,908).
Upon conducting its analysis, the court noted that repudiation occurs when one party to a contract, by their words or conduct, shows an intention not to be bound by the contract. It then emphasized the similarities between the circumstances of this case and those in Perretta v. Rand A Technology Corporation, 2021 ONSC 2111, (discussed in detail here) where the court ordered the employer to pay the employee damages for reasonable notice at common law after deciding the employer repudiated its employment agreement when it failed to comply with one of its termination provisions.
The court concluded “a reasonable person” would conclude the employers did not intend to be bound by the severance provisions in the Agreement and that their decision not to pay the contractual severance was “a point of leverage” to obtain the proposed release. The court stressed that receipt of the severance payment under the Agreement was not conditional upon receiving the proposed release. Moreover, it stated that even if receipt of the severance payment had been an implied term of the Agreement, the proposed release was broader than a release for severance because it included a release from any other claim, a non-disclosure provision and a non-disparagement provision. The court noted that, as was the case in Perretta, the employers sought a benefit from the release to which it was not entitled under the Agreement.
In arriving at the nine-month common law notice period, the court took into consideration that the employee was 44 years old, had been employed for 3.5 years as a senior employee earning a significant income in a niche market (gene therapy) where comparable positions were limited.
Punitive Damages
The court denied the employee’s claim for punitive damage on the basis that the award of nine months’ common law notice (three times the contractual notice) was a sufficient deterrence.
Bottom Line for Employers
Artisan Cells confirms that employers that do not pay their employees what they are entitled to under their employment agreements when their employment is terminated may be found to have repudiated their employees’ employment agreements and ordered to pay them damages for reasonable notice at common law. Accordingly, employers are encouraged to seek the advice and counsel of experienced employment lawyers upon terminating their employees.
