That's how Paul Love is feeling, now that the Supreme Court
of Canada has refused his application for leave to appeal the
Ontario Court of Appeal's decision in his wrongful dismissal
action (Love v. Acuity Investment Management Inc., 2011
ONCA 130). Love hurts despite the fact that the Court of Appeal
took the unusual step of increasing Love's period of reasonable
notice in his action against his former employer.
Love sued Acuity, an investment management firm, when he was
dismissed without cause. He had been a senior vice president and,
at the time of his dismissal, was 50 years old with approximately
two and a half years of service. He also held two percent equity in
the company with his annual compensation including salary,
commissions, profit sharing and the value of his shareholdings
totalling approximately $633,000. At trial, the judge awarded Love
damages based on a five month notice period. Love appealed that
finding and the Court of Appeal substituted a nine month notice
period. The Court's decision was based primarily on its view
that the trial judge over-emphasized one factor (in this case
length of service) to the apparent de-emphasis of others (the
character of employment including level of position and
compensation, and the availability of comparable employment). So
Love looked like a winner at the Court of Appeal. Right?
Not so fast. There were also the "small" matters of
Acuity's cross-appeal and the issue of costs. The cross-appeal
challenged the trial judge's finding that Love was entitled to
the value of incremental capital appreciating on his shares
($219,000) plus the value of incremental profit sharing and
dividends ($273,000), to the end of the notice period. Acuity
argued that the trigger date for Love's obligation to sell his
shares back to the company and their valuation occurred when his
employment ended, and not at the end of the notice period. The
relevant provision in the Investment Agreement between Love and
"Subject to paragraph 4 hereof, if at any
Love's employment is
terminated by Acuity without cause; or
Love should cease to be an
employee of Acuity by reason of death or disability,
...Love agrees that Acuity shall have the option...to
purchase the shares for a purchase price, determined at the date
that Love ceases to be an employee of Acuity... ."
In reviewing the trial judge's finding on that issue, the
Court of Appeal began by distinguishing the concept of notice of
termination from payment in lieu of notice. The termination of
employment without working notice is a breach of the implied
contractual right to reasonable notice. Any payment by the employer
in lieu of notice is not in compliance with the contractual right,
but rather is intended to compensate for the breach. Contrary to
the finding of the trial judge, the Court of Appeal agreed with
Acuity and found that, based on the language of the Investment
Agreement, the trigger date for Acuity's right to repurchase
the shares and for valuing those shares was the date that
Love's employment was terminated without cause, and not at the
end of the notice period. In making this determination, without
expressly stating so the Court of Appeal was clearly distinguishing
the Investment Agreement in Love from the share option agreement in
a previous Court of Appeal decision: Veer v. Dover Corp.
(Canada) Ltd. (1999), 2 BLR (3d) 234. That is, there is a
distinction to be drawn between "ceases to be an
employee" (Love) and "terminate as of
the effective date of such termination" i.e. upon lawful
Equally as important to the case, Acuity made formal offers to
settle the case well before trial, in amounts that exceeded
Love's ultimate award of damages. After adjustment of the costs
by the Court of Appeal, Love remained on the hook for the majority
of the costs. At the end of the day Love's damages were reduced
from $528,000 to $131,434, while the costs awarded to Acuity were
$269,568. It was a costly lawsuit for Love.
What Love means for employers
The Court of Appeal's decision, which the Supreme Court has
chosen not to review, makes it clear that an employer must be very
careful in crafting language that deals with an employee's
entitlements around shares and share options on termination of
employment. Moreover, an employer is well advised not to place too
much weight on any single factor, such as length of employment,
when assessing the notice entitlement of an employee it is about to
dismiss without cause.
The Supreme Court having refused his application for leave to
appeal, Love is left without a further remedy. In the words of the
great Leonard Cohen: there ain't no cure, ain't no
cure, ain't no cure, for Love.
The foregoing provides only an overview. Readers are
cautioned against making any decisions based on this material
alone. Rather, a qualified lawyer should be consulted.
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.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).