The Alberta Court of Appeal has released an important
decision which greatly clarifies the rights and obligations that
exist under a contract of employment between an investment dealer
and an investment advisor.
On August 27, 2010 the Alberta Court of Appeal released a
unanimous decision in Merrill Lynch Canada Inc. v. Soost,
2010 ABCA 251, a case concerning the summary dismissal of a
high-performing financial advisor. At trial, in addition to
awarding damages in lieu of notice, the Trial Judge awarded the
financial advisor $1.6 million "for loss of reputation and
book of business" resulting from the manner of the financial
advisor's dismissal. The Trial Judge stated that absent such an
award, the dismissed employee would have been "woefully under
compensated for his true loss". He purported to base the award
on principles from the recent Supreme Court of Canada decision
Honda v. Keays (Honda).
The decision of the Alberta Court of Appeal, which quashed the
$1.6 million damage award, touches on a number of important issues
related to damages for breach of employment contracts of indefinite
The Court of Appeal reiterated that under a contract of
indefinite term either side may validly end the contract at any
time. An employer wishing to dismiss an employee without cause must
either give long enough advance notice, or pay salary corresponding
to that period of time. An employee has no right to be allowed to
resign instead of being dismissed. No employee has a right to work
after dismissal. Every employee can be dismissed at once with no
notice and without any grounds. Most importantly the Court of
Appeal stated "in ordinary circumstances, damages because of
dismissal with neither reasonable notice nor pay in lieu cannot
exceed what pay in lieu would have been."
It noted one exception to this principle, so-called Honda
damages, that are awarded where the manner of dismissal itself was
unduly unfair or insensitive. It stressed that the unfairness or
insensitivity that justifies Honda damages must be in the methods
used to dismiss, not in the mere fact of dismissal otherwise Honda
damages would become an automatic enhancement to all damage awards
for wrongful dismissal. There was nothing in the facts of this case
to support the finding that anything in the manner of dismissal was
unfair or unduly insensitive.
The Court of Appeal stated that an employee with the usual
contract of indefinite hiring has no right to keep a job, only a
right to reasonable notice or pay in lieu (absent cause to
dismiss). Damages are awarded in cases of wrongful dismissal for
the failure to give reasonable notice not for the loss of a job.
The dismissal itself is not wrong (even without cause), and there
can be no compensation for it. Economic loss from being dismissed
does not fall within Honda damages.
The Court of Appeal stated that although it is common for an
employee to suffer losses going well beyond the lack of reasonable
notice, to the extent they extend beyond the notice period, they
are not compensable.
Of interest to those who provide advice to brokerages, the Court
of Appeal found that an award to compensate for "the loss of
the book of business" in addition to the award for damages in
lieu of notice was in effect double counting. The Court of Appeal
stated that damages for loss of a book of business might look
somewhat plausible if it were treated as a capital item but in fact
its value is merely the present value of future income which is
essentially the same as what is compensated for in failure to give
reasonable notice – lost future income.
Merrill Lynch paid the Respondent on a commission basis. On
dismissal without notice, the Respondent was awarded an amount
based on an estimate of commission that would be earned during the
one-year notice period. In addition, the Trial Judge gave the
Respondent an additional sum (equal to about a further
2-2/3 years salary) to compensate for future
lack of earnings based on commission. The Court of Appeal stated
"the trial judgment here in effect gave lost income, but in
total (both heads) equivalent to a notice period of
3-2/3 years...That could not possibly be
justified from case law."
The Court of Appeal also ruled on the issue of whether
compensation was payable because the manner of dismissal limited
the Respondent's ability to compete for clients. The Respondent
argued that the damages were warranted as Merrill Lynch, by setting
up the manner and timing of the dismissal, had sought to unfairly
compete with the Respondent. The Court of Appeal found there was no
factual basis for the Respondent's argument. The Trial Judge
had found no tort had been committed and, in any event, an employer
and employee are free to compete for clients after dismissal and
such competition cannot form the basis for Honda damages.
Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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