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Fired in Alberta: Supreme Court of Canada clarifies Bonus and Good Faith Issues in Employment Law

The Supreme Court of Canada released a decision today called Matthews v. Ocean Nutrition Canada Ltd. 2020 SCC 26. This was a case where a senior manager of a company was systematically mistreated and lied to about his future to the extent that he was constructively dismissed and left the company. The company he worked for was sold shortly 13 months after he left and the employee missed out on a bonus of over $1 million which would have been payable to him. The Court distinguished the facts from Styles v. Alberta Investment Management Corporation and came to the conclusion that because the bonus would have been payable if he had not been constructively dismissed, and because the clause in the contract dealing with the bonus was not specific to this situation, the bonus was payable.

The court made a number of observations that are important in the area of employment law. At paragraph 7 the court said:

...The trial judge explicitly noted that the employee’s sense of self-worth was particularly tied up in his job. This Court has been resolute in asserting that employment is a source of personal fulfilment — that brand of human dignity that comes from work — and this often comes into sharpest focus when a job is unfairly taken away...

The Supreme Court also clarified the law in Alberta. In discussing the case Styles v. Alberta Investment Corp. 2015 ABQB 621, the Supreme Court took issue with the Alberta Court of appeal's position that payment in lieu is not damages for breach of contract. At paragraph 74 the Court said:

[d]amages for wrongful dismissal are designed to compensate the employee for the breach by the employer of the implied term in the employment contract to provide reasonable notice of termination”.

The Supreme court talked about ways pleadings can be tuned up to allow for bad faith Claims. It appears to be suggested that dishonesty in the performance of the contract can lead to a bad faith claim, specifically in manner of dismissal. The court said that bad faith is different from damages for failure to provide reasonable notice. Compensatory damages for mental distress flowing from this dishonesty might be something to be pled, as well as punitive damages.

The Court said at paragraph 40:

the duty of honest performance — which Cromwell J. explained in Bhasin applies to all contracts, and means simply that parties “must not lie [to] or otherwise knowingly mislead” their counterparty “about matters directly linked to the performance of the contract” — is applicable to employment contracts

The Supreme Court also clarified that [aggravated] Wallace and Keays damages are not restricted to the moment of dismissal, but can relate to conduct over a period of time.

The Court also clarified the difference between severance and damages (for pay in lieu of notice). Damages in lieu of reasonable notice is designed to protect employees by providing an opportunity to seek alternate employment. Severance is designed to compensate long-standing employees for years of service and is often provide for in provincial employment standards.

If you wish to read the Supreme Court's decision it can be found here:

If you have been terminated and wish to discuss how this case might affect you, please feel free to contact us.

The information contained in this article is not legal advice. No solicitor client relationship is formed through this article. The reader is encouraged to retain counsel for advice in these matters.

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