Alberta Employment Law Update - Summer 2012

Davis LLP Employment & Labour Bulletin


IN THIS ISSUE

  • Post-Termination Conduct. In Gillespie v 1200333 Alberta Ltd., Justice J.M. Ross concluded employers cannot rely on a breach of a Non-disclosure Agreement after termination to retroactively justify the employer’s repudiation of an employment contract.
  • Constructive Dismissal. Removal of the right to a benefit, or the opportunity to do something, is sufficient basis for the Court to conclude an employee was constructively dismissed. ADM Measurement Ltd. v Bullet Electric Ltd. was clear that any existing fiduciary duty owed by the employee to the employer and any consequent restrictive covenants end immediately upon constructive dismissal without cause.
  • Acceptance of Severance Offers and Releases. In Penney v Vipond Inc. the Master refused the Application for Summary Dismissal, on the basis that the severance contract containing a release clause was ambiguous. Specifically, unless a release is expressly acknowledged and accepted, parties cannot rely on such a release to obtain summary dismissal.

 

Summary of Decisions

Gillespie v 1200333 Alberta Ltd., 2012 ABQB 105 [Gillespie]

In Gillespie the plaintiff employee was an occupational therapist who had been dismissed based on interpersonal conflict. One warning was given to the employee and she was dismissed three days later. Immediately following her dismissal, the employee cleaned out her desk and took a number of letters with her. These letters were complimentary however, they also contained sensitive and confidential information regarding her patients.

Once the defendant employer discovered the employee had removed these documents, the employer alleged the employee had breached the Non-disclosure Agreement. This breach was used to justify the employer’s position that the employee had been dismissed with cause.

The Trial Judge concluded that while the evidence of personality conflicts and communication problems were not sufficient to justify the employee’s dismissal, the employee’s breach of the Non-disclosure Agreement was sufficient to justify dismissal.

On appeal to the Court of Queen’s Bench the trial decision was reversed based primarily on the Trial Judge’s conclusions on the facts. Specifically, the Trial Judge did not find the employee’s removal of documents indicated a character flaw. Instead, he concluded that the breach of the Non-disclosure Agreement was a breach of a material term of the employment contract and that it would be detrimental to the employer’s business.

Gillespiedraws a careful distinction between misconduct prior to termination and misconduct after termination. In this case the employer was relying on after-acquired knowledge of a post-termination breach to justify the original dismissal. Justice J.M. Ross concluded there are other ways to enforce Non-disclosure Agreements, and that to allow an employer to retroactively justify termination and repudiation of an employment contract by relying on an employee’s post-repudiation breach is illogical and unfair.

Gillespie also confirmed that general reference to the Employment Standards Code (the “Code”), and the “guidelines” are not specific enough to put the employee on notice that their rights are limited to the amounts prescribed in the Code. Justice Ross ultimately assessed the period of reasonable notice at four months.

ADM Measurement Ltd. v Bullet Electric Ltd., 2012 ABQB 150, [ADM]

The facts in ADM were complex, though the parties were unsophisticated, but experienced, businessmen in the oil and gas business. The actual litigants were Mr. McCullough, the plaintiff, who was the owner and operator of ADM, and Mr. Young, the defendant, who was an employee until the date of termination, and only joined Bullet Electric Ltd. following his termination.

Mr. Young joined ADM in 1997, and he and Mr. McCullough were good friends. Mr. Young was a valuable employee and occupied a management position when he was terminated. One of the terms of his employment was that Mr. Young would benefit from a profit-sharing program and when he was able purchase the business, Mr. McCullough would sell it to him. The dispute arose in September 2000, when Mr. McCullough offered to sell the business to someone else, instead of Mr. Young.

Justice A.W. Germain concluded that Mr. McCullough’s unilateral withdrawal of the right to purchase ADM was a fundamental and substantial change to the employment contract and therefore constituted constructive dismissal. Justice Germain went on to state:

"there is a recognized benefit that flows from the chance to do something...and that removal of this benefit is in fact a real loss of something that was integral to the contract between ADM and Mr. Young (at para 136)."

The termination through constructive dismissal was made without cause and there was no adequate notice, therefore Mr. Young’s termination was wrongful.

Justice Germain found Mr. Young did not owe any fiduciary duty to ADM but concluded that, even if he had found there was such a duty, that the effect of the constructive dismissal was to remove any possible restrictive covenant.

Finally, ADM also alleged that Mr. Young and Bullet Energy Ltd. had interfered with ADM’s contractual relationships. Justice Germain plainly rejected this argument for the simple reason that:

"while ADM and its clients interacted on a contractual basis, those contracts were for individual ‘piece-work’ tasks. Any long-term interaction between ADM and the oil patch businesses was informal, not contractual (at para 162)."

He concluded neither Mr. Young, nor Bullet Energy Ltd. interfered with ADM’s contractual relationships.

Penney v Vipond Inc., 2011 ABQB 785, [Penney]

In Penney, Master Hanebury confirmed that a release must be unequivocally and expressly agreed to, in order to meet the high threshold in an Application for Summary Dismissal.

When the plaintiff employee was dismissed without cause, he signed a severance letter which outlined the amounts that would be deposited into his bank account. The release was attached; however, the employee did not sign the release.

The defendant employer argued that since the employee had signed the severance proposal and had accepted the payments associated with both the severance and the release, the employee had effectively released the employer.

Master Hanebury concluded because the severance letter and the attached release were drafted by the employer, and were not clear in their effect, that the employee’s acceptance of the payments did not constitute acceptance of the release. Had Mr. Penney knowingly accepted the funds associated with the release, then that would have constituted acceptance, but the evidence did not support that conclusion.

Summary dismissal was refused and the issue of whether Mr. Penney in fact released Vipond was a genuine issue for trial.
 

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