There’s no way around it. An employment contract that limits liability will also limit liability against managers, if they were acting in the course of their employment. An Ontario Court of Appeal decision issued this week has confirmed that managers cannot be denied the benefit of a limited liability clause: Richards v. Media Experts M.H.S. Inc. 2012 ONCA 769.
Ms. Richards’ employment was terminated. She sued her employer. She also sued her manager for intentional or negligent infliction of nervous shock.
Ms. Richards had signed an agreement with her employer that specifically set out her rights if her employment was terminated. It clearly stated that she “shall not have the right to receive any severance payment, damages or indemnity by reason of such termination” beyond the twelve months notice specified in the agreement.
The employer brought a motion to strike the claim against the manager in its entirety. The Superior Court judge allowed the motion on the basis that the limitation of liability impliedly extended its benefit to the manager and the manager was acting in the course of his employment (the test set out in London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299.
The Court of Appeal agreed that both of the conditions set out in London Drugs were met in this case:
[8] In respect of the first requirement, the appellant negotiated her employment agreement with the personal respondent who became her boss. We agree with the submission of counsel for the respondents that the relationship was such that the parties could not have contemplated that the appellant could make claims against the personal respondent arising from her dismissal that she could not make against the corporate respondent. The limitation clause does not make sense otherwise.
[9] In respect of the second requirement, the material facts pleaded in the statement of claim against the personal respondent indicate that he was acting on behalf of the corporate respondent when he terminated the appellant’s employment. The allegation in the statement of claim that the personal respondent acted “on a frolic of his own” is a conclusory statement that does not accord with the material facts pleaded and does not convert the actions of the personal respondent (as inappropriate as they may have been) into an independent tort.
[10] The appellant also argued that the limitation clause should not apply in this case because it did not expressly name employees and officers of the corporation and was therefore ambiguous and subject to the application of the principle of contra proferentem. We do not accept this argument. For the reasons we have explained above, we are satisfied that the parties intended the limitation clause to apply to the personal respondent.