When an employee fails to fulfill his functions as expected, the
ultimate consequence is a termination of employment "for
cause", which implies that no notice or other severance is
paid to him by the employer. The Superior Court of Quebec
recently went further. In Valeurs mobilières Desjardins inc. v.
Beaulne, an investment advisor was also ordered to pay his
former employer, Valeurs mobilières Desjardins inc.
("VMD"), $141,233.96, with costs. Why? To
compensate VMD for amounts it had to pay a client who suffered
damages because of the advisor's failure to follow the
During his nine years of employment, Beaulne was an investment
advisor for VMD. In 2006, Beaulne was disciplined after he
carried out inappropriate operations on the mutual funds of
clients' accounts. His termination of employment had been
recommended but he was granted a last chance.
Again, in 2007, a client complained that transactions had been
made on his account that were contrary to his investment objectives
and that he had suffered a significant financial loss. After
an inquiry, the employee was terminated. VMD negotiated a
settlement with the client and paid the client $150,498.53 in
VMD deducted the $12,754.39 in unpaid commissions and $510.18
for an unpaid annual holiday that it owed Beaulne, and sued him for
the balance - $141,233.96.
The Employment Contract
It is rather unusual that an employment contract contains an
indemnification undertaking by an employee towards his or her
employer. But this employment contract did – it
contained the following clauses:
The investment advisor is responsible for any loss
resulting from the failure of the employee to carry out the
transaction in accordance with the instructions of the client or in
a way that does not meet with the investment objectives of the
The investment advisor is liable for any debt resulting
from a judgment or a settlement negotiated by VMD following a
judicial action or a complaint from a client.
The Quebec Superior Court agreed with VMD. In response to
Beaulne's arguments that the contract was abusive, the Court
disagreed. Furthermore, the Court concluded that the employee's
undertaking to reimburse the employer survived the termination of
the contract – despite that VDM's settlement with the
client occurred two days after the termination.
Ramifications for Employers
Other than in the context of non-competition and
non-solicitation undertakings, it is quite rare for employers to
sue former employees for damages. In this decision, the
Quebec Superior Court confirmed that, when the employment contract
is properly drafted, this is an avenue available to
employers. There is no reason why this principle could not
apply throughout the rest of Canada. What is not clear,
however, is whether the Court would have made the same decision in
the absence of an indemnity provision in the employment
contract. This decision once again stresses the importance of
carefully drafted employment contracts or offer letters.
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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