- Subsequent event evidence. The Alberta Court of Queen's Bench overturned a Provincial Court decision, noting the differences between after-acquired knowledge and post-termination conduct, and clarifying the proper test for reasonable notice.
- Contractual salary suspension and non-solicitation provisions. The Alberta Court of Queen's Bench held that contractual salary suspensions of a plaintiff sports agent during the NHL lockout were admissible, provided the agent still received the minimum wage. The Court also held that the agent's knowledge of—and inaction regarding—solicitation on his behalf was enough to establish a breach of the non-solicitation provisions in his employment agreement.
- Director's liability for the termination of employees. The Alberta Court of Appeal clarified the powers of directors in respect of the evaluation and termination of a corporation's employees.
Gillespie v. 1200333 Alberta Ltd.
Alberta Queen's Bench, 2012
Facts:
Bonita Gillespie ("Gillespie"), an occupational
therapist, was hired on February 1, 2007, by the Defendant 1200333
Alberta Ltd. (the "Company") to work with various clinics
serving the public as the Primary Care Network
("PCN").
Shortly after commencing her employment, Gillespie received and
had the opportunity to review a "Policies and Procedures
Reference Manual" ("PPRM") which covered areas such
as benefits, annual performance reviews, and expectations of
employees such as client confidentiality. Confidentiality was also
covered by the documentation provided to Gillespie at hiring,
including completion of a "Non-disclosure Agreement"
("NDA") dated February 1, 2007, and amended April 25,
2007. The NDA required Gillespie to take all security measures
regarding confidential information, and expressly prohibited the
removal, retention or destruction of any materials containing
confidential information upon termination.
On February 6, 2008, one of the doctors to whom Gillespie reported
expressed concern over Gillespie's treatment of his
personal nurse, and the manner of completion of a patient form.
Gillespie was unable to fill out the form due to lack of
information surrounding the patient, and was spoken to by her
supervisor, Colleen Enns, in respect of the incident with the
nurse. On February 11, 2008, Gillespie used harsh words with a
newly hired social worker, and the following day was chastised by
Ms. Enns and a Manager of an associated clinic for her language.
Gillespie became extremely agitated and was consequently sent home
from the meeting for two days and asked to return February 15,
2008. Justice Skitsko noted that while the official reason for
sending Gillespie home was that "...she was too upset to see
patients[,]" the real reason was to give Ms. Enns, Ms. Walker
and Frank Couglan, the Chief Administrative Officer, the
opportunity to consider Gillespie's future with the
company. Before leaving the office on February 12, 2008, Gillespie
was also given a letter of reprimand warning her that she would be
subject to disciplinary action and/or termination if her behaviour
did not show an immediate and sustained improvement.
In a 2011 Provincial Court decision, Justice Skitsko stated that it is settled law that an employer can rely on after-acquired knowledge that just cause existed at the time of dismissal, and also accepted that the removal of confidential client information which remained offsite with Gillespie for several months would prejudice the Company's business. He further held that the non-disclosure agreement and its wording negated Gillespie's argument that she could not be bound by the provisions as the actions occurred after termination, because such an interpretation would render the agreement meaningless.
Justice Skitsko dismissed Gillespie's claim, finding that the two weeks pay in lieu of notice was reasonable. In reaching this finding Skitzko J. applied the criteria established in Bardal v Globe and Mail Limited,(1960) 24 D.L.R. (2d) 140: the nature of employment, length of service, age of employee, and availability of similar employment in the circumstances, such as the economy. The Trial Judge also noted as a "salient factor" that the after-acquired knowledge gave the Company just cause for dismissal.
Issues:
The issues on appeal were whether the Trial Judge erred in law, fact, or mixed law and fact in concluding:
- that Gillespie's post-termination conduct was sufficient to ground termination for cause;
- that Gillespie's post-termination conduct should factor into the calculation of reasonable pay in lieu of notice; and
- that two weeks' pay in lieu of termination was reasonable.
Decision:
Sufficient grounds for termination for cause
Both Gillespie and the Company agreed that the Trial Judge failed to draw the distinction between after-acquired knowledge and post-termination conduct, or "subsequent event evidence". Madam Justice Ross of the Alberta Court of Queen's Bench noted that subsequent event evidence can be relied on when it sheds light on the reasonableness of dismissal for cause at the time of the dismissal, or when it reveals an undesirable aspect of the employee's character that would in itself justify the dismissal.
Justice Ross noted that "the finding of a breach of contract cannot be equated with a finding of a character flaw that would justify dismissal, especially in view of the Trial Judge's earlier finding that the Appellant was stunned and devastated when she removed the documents from the office [para 26]." Ross. J rejected the Trial Judge's finding that a post-termination breach of the non-disclosure agreement would render such an agreement meaningless, as such breaches could be enforced through proceedings that would not "involve the illogic and unfairness of permitting an employer to retroactively justify its repudiation of an employment contract by an employee's post-repudiation breach [para 31]," such as professional disciplinary proceedings or proceedings under privacy legislation.
Reasonable pay in lieu of notice
Justice Ross held that whether a termination was or was not for
cause is not a criteria of the Bardal test, and therefore
the Trial Judge's reliance on this as a "salient
factor" was an error in law. In light of this error, it was
the responsibility of the Court of Queen's Bench to
determine the appropriate notice period.
In applying the criteria set out in Bardal, Justice Ross
noted the following:
1. At the time of termination Gillespie was 52 years old;
2. Gillespie was a highly trained Occupational Therapist with particular training in mental health and psychiatry;
3. Gillespie was in a position of responsibility and authority;
4. She earned $83,600 (plus benefits) at the time of her dismissal; and
5. Despite mitigation, she was unable to find a comparable position for approximately two-and-a-half years.
[para 37]
Upon review of these factors, and noting jurisprudence on
analogous facts, Justice Ross assessed reasonable notice at a
period of four months. In coming to this conclusion she rejected
the Company's argument that Gillespie was only entitled to
the amounts prescribed by the Alberta Employment Standards
Code, R.S.A. 2000, c. E-9 (the "Code"), stating that
mere reference in an employment agreement to adhering to the
guidelines of the Code does not mean that the employee is
only entitled to the minimum requirements therein. Justice Ross
noted that any agreements to exclude an employee's common
law protections and limit an employee's notice to the
minimums provided in the Code must be clear and
unambiguous.
Evans v. The Sports Corporation
Court of Queen's Bench of Alberta, 2011
Facts:
The Plaintiff Richard Evans ("Evans") was employed by
the Defendant The Sports Corporation ("TSC"), a sports
agency headed by Ritch Winter and Steve Kotlowitz, under a three
year contract beginning April 18, 2003. Evans became the primary
connection to the Eastern European "pipeline" (the
"Pipeline"), where TSC had agreements with two agents
from Slovakia ("Kadlecek") and the Czech Republic
("Henys") who would help find TSC clients. Evans became
primarily responsible for servicing any clients obtained via the
pipeline, and although he successfully serviced those clients
referred by Kadlecek and Henys, he was relatively unsuccessful in
recruiting new clients via other means.
Irrespective of any difficulty recruiting new clients, a renewal
contract (the "Agreement") between TSC and Evans was
signed in Fall 2003 after the exchange of several drafts, given the
need to draft a provision in contemplation of the 2004-2005
lock-out. This provision held that in the event of such a labour
disruption, TSC, acting reasonably, would be permitted to reduce or
suspend the payment of base salary to the COO (Kotlowitz), and that
Evans' salary would be reduced or suspended for the same
duration by the same percentage. The Agreement also included
provisions regarding non-disclosure, developments and unfair
competition ("s. 7"), severability and an expression that
the Agreement was the entire agreement.
At the end of June 2004, Evans was notified that the lockout
provision would take effect and that his salary would be suspended
as of June 30, 2004. Evans had not budgeted to go without salary
for the months of July and August, and was given $12,000 (the
"Loan"), the net amount he would have received in July
and August. Repayment terms were never discussed and it was
concluded this amount was indicated as a "loan" by
Kotlowitz and Evans to appease Winter, who did not think TSC should
give Evans anything, given that TSC had issued him a Record of
Employment ("ROE") at the end of June.
Evans submitted the ROE and began receiving Employment Insurance
benefits in July 2004. He continued to receive TSC benefits and
office parking from, and testified that it was "business as
usual", although Winter and Kotlowitz testified Evans had been
encouraged to work elsewhere as there were no contracts to
negotiate and limited servicing given that the clients were not
playing in the NHL. There were joint efforts ("fishing")
between the three agents to find alternative work, with the profits
to be split between them. Winter negotiated some work with Skate
Canada, on which Evans did a considerable amount of the work.
Winter was paid a larger portion as he had netted the fish.
Kotlowitz testified he paid Evans his portion because he knew Evans
needed the money. The Skate Canada payments ($18,379) and the Loan
were the only salary received by Evans during the lockout.
The lockout ended July 13, 2005, and TSC resumed salaries for July
and August on a rolled-back basis. The three other agents
(including Kotlowitz and Winter) agreed to receive half salaries as
of September 1, 2005, but Evans refused and was paid his full
salary. This further weakened the relationship between Evans and
Winter, and when the Agreement renewal deadline of February 17,
2006 neared, each of Evans and Winter wanted the other party to
make the first offer. Evans gave notice of renewal, but refused to
make an offer. TSC (at Winters' request) held out for an
offer from Evans and ultimately failed to give notice of renewal or
issue an offer. At the time of Evans' notice of renewal he had
already had a conversation with Kadlecek and the son of Henys in
respect of what the two European agents might do if Evans left
TSC.
On April 12, 2006, Evans announced he would be leaving when his
contract expired some days later. TSC responded that Evans should
leave immediately. Evans made immediate arrangements to have his
cell phone forwarded to the new telephone line he had already set
up in his home. Winter and Kotlowitz were concerned about the TSC
clients Evans had been servicing and, later that day, issued a
letter to Evans reminding him of his obligations under s. 7 of the
Agreement.
Shortly after Evans left TSC, the company began to receiving
termination notices from many of the clients who had been serviced
by Evans. TSC believed Evans was breaching the restrictive covenant
or non-solicitation provisions of the Agreement, but made minimal
efforts to mitigate its damages, making only a few telephone calls
and instead relying on the Agreement for the payment of any
revenues generated by Evans from these clients for at least the two
year duration of the restriction. Evans was entitled to compete
with TSC immediately on his departure, provided the clients were
those he had recruited himself, for which he had been paid a
bonus.
Issues:
The primary issues in this case were as follows:
1. Was Evans entitled to be paid for the days between the time he
was asked to leave the offices and the expiration of the Agreement
(the "Stub Period")?
2. Was Evans entitled to receive his full salary for the
lockout?
3. Did Evans breach the Agreement by attempting to obtain the
withdrawal from TSC of any employees of TSC within 24 months of the
end of his employment with TSC?
4. Did Evans owe fiduciary duties to TSC, and if so, did he breach
those obligations?
5. Did Evans breach the Agreement by directly or indirectly
calling on, soliciting, diverting, taking away (or attempting to)
any client of TSC within 24 months of the end of his employment
with TSC?
Decision:
Stub Period Payment
Justice Graesser held that when an employment agreement is for a
fixed term, both parties are entitled to hold the other to the
agreement. Evans was willing to work the Stub Period, therefore TSC
had to continue to pay him and provide his benefits absent
termination for cause.
Lockout Entitlements
Justice Graesser found that the Agreement was not ambiguous and
there was no measurable inequality of bargaining power given the
legal backgrounds of Evans, Kotlowitz and Winter, and the access of
all parties to legal counsel. According to the Agreement, Evans was
to be remunerated in a similar fashion to Kotlowitz in respect of
salary reduction, suspension and repayment. Graesser J. held that
while it was reasonable for TSC to protect its finances in June
2004 once the lockout was a certainty, under the Agreement TSC was
not permitted to suspend salaries until September 16, 2004.
Similarly, he held that it was not unreasonable to resume salaries
on a rolled-back basis once the lockout was officially over on July
13, 2005, but that Evans was entitled to his full salary from July
14, 2005 onwards. At the date of trial Kotlowitz had not been
compensated for lost earnings, and given that the Agreement tied
Evans' compensation to that of Kotlowitz, Evans was not
entitled to anything for the balance of the lockout period.
Justice Graesser dismissed Evans' argument that the
lockout provision should be struck for failure to comply with the
Alberta Employment Standards Code (the
"Code") and that he should be entitled to his
full salary for the lockout period. Graesser J. held that a salary
reduction or deferral agreement should be interpreted to give
effect to its clear intent, subject to the understanding that
parties cannot contract out of the minimums wage, benefits, and
conditions provided for by the Code. As Evans continued to
receive benefits and the total of the Skate Canada payments and
alleged Loan were more than the minimum wage payable, the result of
the Agreement did not contravene the legislation. Graesser J.
acknowledged that in such a situation it was preferable to take a
"wait and see" approach rather than declare the provision
void based on what could have otherwise happened. Any conversations
suggesting Evans seek work elsewhere during the lockout were deemed
irrelevant, given the entire agreement provision in the
Agreement.
Lastly, Justice Graesser held that Evans' submission of an
ROE and receipt of EI benefits was indicative of his resignation of
employment, and that any other finding would be tantamount to the
court to turn a blind eye to a possible fraud committed against the
Government of Canada, and that Evans had been terminated and was
therefore disentitled from claiming any further salary from TSC for
the period of September 2004 to July 13, 2005. Evans did, however,
have a contractual entitlement to any salary under the operation of
the lockout provision, noting that these amounts may be subject to
repayment of the EI benefits. In short, Justice Graesser held that
while Evans was no longer an employee, he still possessed a
contractual relationship with TSC.
Withdrawal of Employees
Justice Graesser rejected Evans' argument that Kadlecek
and Henys were not employees of TSC due to an absence of both
employment agreements and registration of the two as employees with
the NHL Players' Association ("NHLPA"). He held
that the two gentlemen were clearly key personnel in the
association and were essential to the Pipeline that TSC had relied
on throughout its operation, noting that draft agreements existed
with each party. Graesser J. held that it would be impossible to
imagine the parties not intending Kadlecek and Henys to be treated
as employees when drafting the Agreement, and that any failure to
notify the NHLPA was a matter between TSC and the NHL, not one that
affected the nature of TSC's relationships with Kadlecek
and Henys.
Graesser J. held that Evans breached the Agreement by soliciting
and entering into arrangements with Kadlecek, and by soliciting
Henys (via the son of Henys) to provide services to his new sports
agency.
Fiduciary Obligations
Justice Graesser applied the test for a fiduciary relationship as
set out at para.17 of Firemaster Oilfield v. Safety Boss,
2000 ABQB 929 and para. 108 of Altam Holdings Ltd. V.
Lazette, 2009 ABQB 458:
(a) whether the fiduciary has scope for the exercise of some
discretion or power;
(b) whether the fiduciary can unilaterally exercise that power or
discretion so as to affect the beneficiary's legal or
practical interests; and
(c) whether the beneficiary is peculiarly vulnerable to or at the
mercy of the fiduciary holding the discretion or power.
Justice Graesser held that hiring and firing powers are merely
indicia of a fiduciary relationship, and that Evans nevertheless
met all of the above-listed elements. Evans was able to exercise
discretion in the acceptance of clients and servicing therefore,
was able to unilaterally sign (or choose not to sign) new clients,
negotiate contracts for said clients, and service said clients,
noting that for many clients, Evans was the only senior TSC
employee they had worked with or known.
Solicitation of TSC Clients
Justice Graesser noted that the jurisprudence shows that in
respect of a client whose files they control, departing
professionals such as lawyers have both a right and an obligation
to notify said clients of the right to remain with the firm,
transfer the file, or hire another lawyer. He further noted that
these rights and duties have not been found to extend to a
corporate setting. Graesser J. agreed with the right and obligation
to advise of the departure, but stated that any direct or indirect
solicitation beyond that should be governed by the fiduciary
duties, by contracts, or by the rules of the relevant professional
association. He further stated that "the courts should be slow
to dilute legitimate non-solicitation obligations by treating
everyone who has clients as if they were a lawyer or doctor where
there is a strong public policy reason to put the
client/patient's rights ahead of the proprietary interests
of the professional [para. 225]." Graesser J. distinguished
the canvassed jurisprudence in that the cases had not dealt with
express restrictive covenants or non-solicitation agreements, which
will require each case to necessarily turn on the context
surrounding the involved parties, the wording of the agreements,
and the nature of employment.
Justice Graesser held that despite the wording of the provisions
regarding "non-competition", the ordinary wording of s. 7
did not prohibit Evans from accepting a TSC client as his own
during the two year period following his departure unless he did
something deliberate to encourage this transfer, and therefore the
provisions were more properly described a non-solicitation
agreement. He noted that "[f]or a non-solicitation covenant to
be enforceable it must be found to be protect [sic.] valid
propriety interests of the employer, reasonable between the
parties, and reasonable in the public interest [para.
272]."
Justice Graesser found that apart from the withdrawal of employees
Kadlecek and Henys and the possible involvement of those employees,
there was no evidence before the court of any apparent action of
Evans that caused any TSC client to sign with Evans. Nevertheless,
and absent any specific request, Evans was aware of the results of
the efforts of Kadlecek and Henys, who were pursuing clients on his
behalf, and Graesser J. held that "[Evans'] turning a
blind eye to their activities [did] not shield him from the
consequences of their actions [para 295]." Graesser J. held
that TSC had met its burden of proof, establishing a breach of the
s. 7 obligations on a balance of probabilities.
Mitigation of Damages
Ultimately, Justice Graesser found that TSC had failed to mitigate
its damages, and did not even make a major effort with respect to
the four players generating the majority of the revenue lost to
Evans, instead relying on the damages provision in the Agreement.
TSC's damages were accordingly reduced by 50% due to this
failure to mitigate.
Ahmad v. Athabasca Tribal Council Ltd.
Alberta Court of Appeal, 2010
Facts:
The Appellant Syed Joe Ahmad ("Ahmad") commenced
employment as CEO of Athabasca Tribal Council Ltd.
("ATC"), a corporation composed of Five First Nations
Bands, on April 1, 2003. In his role as CEO Ahmad also sat on an
executive group formed through All Party Core Agreements between
the five First Nations, energy companies, and three levels of
government. During the course of Ahmad's participation in
executive group meetings, ATC Board of Directors meetings, and
executive management meetings, various players became concerned
became with his business views. ATC Director Jim Boucher
("Boucher") met with Ahmad on September 5, 2003, to
communicate some of the concerns of the energy companies, in
response to which Ahmad e-mailed a summary of said meeting to a
number of individuals including Boucher and Syncrude VP Phil
Lachambre ("Lachambre"), an industry representative who
also sat on the executive group. On September 16, 2003, the ATC
Board of Directors met and told Ahmad he was terminated. ATC
offered Ahmad five weeks' severance pay if he would sign a
release. Ahmad refused.
Ahmad brought an application for wrongful dismissal against ATC
and sued Boucher and Lachambre for tortiously inducing his
termination of employment. After Ahmad closed his arguments,
Boucher and Lachambre both applied for, and were granted, nonsuit
applications.
The trial judge also held that ATC had not breached the employment
agreement. The trial judge held that the agreement was not a
fixed-term contract as it clearly provided for early termination
for any reason without cause provided the employee was given one
month's notice for each year of service, and any entitlements
under the Alberta Employment Standards Code. He further
agreed with ATC's argument that for five and one half
months employment, Ahmad was entitled to two weeks' notice
(one-half of one month), together with one week's salary
under the Employment Standards Code, for a total of three
weeks' salary.
This decision appeals the granting of Boucher's nonsuit
application and the judgment against ATC in an amount equivalent to
three weeks' salary. A separate appeal of the granting of
Lachambre's nonsuit application was dismissed.
Issues:
The issues on appeal were whether the trial judge erred:
1. by applying the wrong legal test for nonsuit
applications;
2. by holding there was no direct evidence that Boucher induced
Ahmad's termination, in that courts can infer a breach by a
party when it is reasonably foreseeable a breach could result from
that party's conduct;
3. by applying the wrong legal test in determining Boucher was not
personally liable as a Director of ATC;
4. in determining the employment terms were unambiguous and the
appellant was only entitled to three weeks' salary;
and
5. in determining ATC had complied with the terms of the agreement
when no severance payment was made to Ahmad.
Decision:
The Court advised that "correctness" is the standard of
review involving questions of law, and that findings of fact
regarding the essential terms of a contract have a review standard
of "palpable and overriding error".
The Court dismissed the appeals against ATC and Boucher on the
following grounds:
Nonsuit Applications
The Court agreed with the earlier decision of the Court in the
appeal against Lachambre, when it determined there had been no
error in the legal test for nonsuit applications.
Direct Evidence
The Court held that the trial judge recognized that a burden of
proof can be met by drawing inferences, but that he could not draw
any such inferences from those actions to support a conclusion that
Boucher had induced the breach of contract (which breach was itself
assumed for the application of the test). The Court cited its
reasoning from the appeal against Lachambre, that criticism of
someone is not itself sufficient to constitute the tort of inducing
breach of contract. Other than the concerns voiced by Boucher,
Ahmad was unable to point to any evidence supporting inducement.
The Court was unable to find palpable and overriding error of the
trial judge and therefore unable to interfere with his
decision.
Director's Liability
The trial judge held that personal claims against a director could
only succeed if the director was acting outside his or her duties
as director to further personal interests over the interests of the
corporation, and that there was no evidence that Boucher conducted
himself in this manner. The Court upheld this decision, stating
that both ATC and Boucher, as a Director, had the right to manage
and address performance issues of Ahmad as an employee. The Court
held that the dealings between Ahmad and Boucher as employee and
director, respectively cannot therefore be characterized as outside
of their respective roles, and thus Ahmad had not demonstrated any
error in the trial judge's conclusion that Boucher could
not be held personally liable for his conduct as Director.
Wrongful Termination
The Court further held that the trial judge had correctly found
there was no breach of contract by ATC. The Court determined the
contract was clear and unambiguous, and therefore the principle of
contra preferentem was not applicable.
The Court held that the trial judge did, however, err in his
awarding of anything more than the 1 week of notice Ahmad was
entitled to under the Employment Standard Code, but as
this had not been appealed the Court did not correct it.
ATC Compliance with Agreement
The Court held that ATC had offered Ahmad more than required under
the agreement, provided he sign a release, and that there had been
no breach of the agreement because the appellant refused to accept
the pay in lieu offered.
(The Supreme Court of Canada denied leave to appeal in April 2011).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.