When Employee Termination in BC Backfires: Contract Repudiation, Punitive Damages, and Reasonable Notice

A BC employer's attempt to reduce severance costs backfired spectacularly – costing the company an extra $25,000 in punitive damages plus 18 months of enhanced severance pay ($351,095.78 plus vacation pay plus costs).  The mistake?  Excluding commissions from the severance calculation and demanding the employee sign a release, neither of which was permitted under the employment contract.

The BC Supreme Court's decision in Klyn v Pentax Canada Inc., 2024 BCSC 372, serves as a costly reminder: employment contracts are only as good as your compliance with them.

What is Contract Repudiation?

Contract repudiation occurs when an employer fundamentally breaches an employment agreement – such as failing to pay contractually promised severance or imposing unauthorized conditions.  In BC, this can nullify restrictive contract terms and entitles the employee to common law reasonable notice, often resulting in significantly higher damages.

What Happened: Klyn v Pentax Canada Inc.

Brad Klyn worked for Pentax Canada Inc. as an employee from 2007 to 2022 in a sales role.  His employment contract included a termination clause guaranteeing severance calculated using a formula that specifically included his commission earnings.

When Pentax terminated Klyn without cause in April 2022, the company:

• Paid only his base salary (excluded commissions);

• Required monthly job search reports (not in the contract);

• Demanded he sign a full release to receive severance (not in the contract); and

• Stopped all payments after three months when Klyn didn't comply.

Klyn sued, arguing these actions constituted repudiation of the employment agreement.

The Court's Decision

The court sided with Klyn on all counts.

The judge ruled that Pentax's failure to include commissions and the imposition of unauthorized conditions amounted to a fundamental breach that nullified the employment contract's termination clause.

Because Pentax repudiated the contract, Klyn became entitled to common law reasonable notice instead of the more limited contractual severance.

The damages:

• 18 months' pay based on his full average earnings (base + commissions); and

• $25,000 in punitive damages for bad faith conduct.

The court called Pentax's tactics "oppressive and reprehensible," noting the company exploited Klyn's vulnerability to extract concessions for its own benefit.

What This Means for BC Businesses 

With BC courts showing increased willingness to award punitive damages for bad faith terminations, employers must strictly adhere to employment contract terms – especially during terminations.

Your Action Plan: Avoid Repudiation

Before terminating any employee:

• Review the employment contract carefully – What exactly does it promise?;

• Include ALL contractual compensation – Commissions, bonuses, and benefits if specified;

• Never add unauthorized conditions – No job search requirements, releases, or non-competes unless the contract explicitly allows them or you offer a new benefit above and beyond what the contract and BC Employment Standards Act require;

• Pay the full amount as specified – Don't create conditional payment structures; and

• Document your calculation method – Show good faith compliance.

Pro tip: Have an employment lawyer review your termination letter and severance calculation before you deliver it.  The cost of a legal review beats a $100,000+ wrongful dismissal claim.

When Termination Clauses Fail 

Changes in BC employment law can invalidate previously valid clauses.  We recommend employers conduct a termination clause audit every 2-3 years to ensure continued compliance. 

A contract review now can prevent a six-figure wrongful dismissal claim later.

Planning a Termination? Review Your Approach First

Before you deliver that termination letter, ensure your severance calculation and process comply with both your contract and BC law.  Alex Robertson helps employers in BC navigate terminations to minimize legal risk and avoid costly disputes.  He offers:

• Employment contract audits;

• Severance calculation reviews;

• Termination letter drafting; and

• Strategic advice on termination processes. 

Contact: Alex Robertson | (604) 736-9791 | ar@dwslaw.ca 

Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. Employment law is fact-specific. For advice about your specific situation, please contact us. The information for this article was compiled on January 29, 2026.