Love v. Acuity Investment Management Inc., 2011 ONCA 130
In our previous blog we highlighted the Ontario Court of Appeal’s interesting decision to award a lengthy 9 month notice period to an executive who had 2.5 years of service. In this blog we seek to bring to your attention another interesting determination made by the Court of Appeal in that same case. This determination relates to that executive’s equity stake in the company that employed him.
As a condition of Mr. Love’s 2% equity stake in Acuity, his employer had the option to buy-back his shares as of the date he was no longer an employee of Acuity. The actual language of the agreement reads as follows:
Such option may be exercised by notice to Love from Acuity within sixty (60) days from the date that Loves ceases to be an employee of Acuity.
The trial judge found that the date on which Mr. Love ceased to be an employee of Acuity was the end of the notice period (5 months from dismissal based on the notice period that was awarded at trial).
The employer cross-appealed in Mr. Love’s case in relation to the trial judge’s determination of when Acuity Investments was entitled to buy-back his equity stake. What was driving this appeal was the fluctuation in the share price of Acuity Investments. If the share price rose during the notice period, then Mr. Love would have an interest in the Court fixing the date that he ceased to be an employee of Acuity at the end of the notice period, rather than on the day he was actually dismissed.
The Court of Appeal allowed the cross-appeal brought by Acuity. The reasoning was that the clause set out above made the termination date relevant to the calculation of the price that Acuity would have to pay Mr. Love for his shares. The Court of Appeal commented that the notice period in wrongful dismissal law is intended to remedy the damage caused by a breach of the employment contract. When an employee is dismissed without cause, the contract is breached and there is no longer an employment relationship. The date on which the contract is breached in this case would be the day that Mr. Love was dismissed without adequate notice, in other words the day on which he was fired. According to the Court of Appeal, the notice period does not serve to extend the period of Mr. Love’s actual employment, but rather is intended to remedy the damage caused by the end of the employment.
This distinction made by the Court of Appeal is an important one. This decision suggests that some of the benefits that employees receive from employment may not be subject to compensation within a notice period. For example, many people have a company parking space as a privilege of being an “active” employee of a company. It may not be necessary for a company to allow a dismissed employee to continue to use the parking space during the notice period because that person is no longer an active employee. The same could apply to a corporate gas card or corporate expense card. Employers should make it clear that a gas or expense card is to be used only for employment duties as engaged in by an active employee. In such a scenario the benefit conferred by that card should not extend through the notice period.
We recommend that employers and employees seek legal advice prior to taking a position on such issues.