Alberta company gives worker equipment as severance pay

A recent Alberta Provincial Court decision found that a federally regulated employer can substitute goods for money when providing severance pay — but that depends a lot on the jurisdiction, says Dylan Snowdon, an employment lawyer and partner at Carbert Waite in Calgary.

“The employer was successful in defending its severance scheme, but if it had been an [Alberta] Employment Standards Code matter, I think the employer would have been ordered to pay the amount in lieu of notice,” says Snowdon, who notes that the Alberta legislation requires an advance written agreement for an employee to substitute goods for money as severance pay.

“Had it been under provincial jurisdiction, they would have been better off with the company just selling its equipment and then using the proceeds to pay the employee.”

Company assets sold off

John Hubbard worked as a truck driver and fabricator for an Alberta hauling company owned by Andre Laferriere starting in 2010. When he started his employment, Hubbard purchased some tools for himself, which he kept in a locked box. He also used tools and equipment owned by the company over the course of his employment.

In 2018, a recession significantly reduced business for Laferriere’s company. He called a meeting on Oct. 31 with Hubbard and other employees and subcontractors to announce that the company would be no longer performing hauling work. Another company had made an offer that Laferriere had accepted and all of the company’s assets — including trucks, trailers, and tools — were to be sold off through an auction.

Laferriere added that employees would be kept on for about one more month and he told Hubbard that the company’s equipment would have to be washed and readied for auction. Hubbard shook his hand and after the meeting, Laferriere said he would “take care” of Hubbard.

Over the next month, Hubbard cleaned the company’s equipment and got it ready for auction. Most of the equipment was eventually sold.

Read more: Frustration of an employment contract still warrants severance pay, according to an Ontario court decision.

Handshake closes deal

As they were closing up shop, Laferriere gave Hubbard a welder, a set of torches, and two welding curtains. He also gave him a toolbox, tools, steel, aluminum, and other business supplies, as Hubbard had mentioned that he wanted to start his own business.

In total, Laferriere claimed that he gave Hubbard tools worth between $60,000 and $70,000 and around $15,000 worth of steel, although he didn’t have receipts for much of it. Hubbard asked Laferriere if the equipment was his severance, to which Laferriere replied, “That’s all I have to offer. There is no severance. I’m just giving this to you.”

Hubbard later said that the only tools he took were his own — although a co-worker testified that he wanted to buy the company’s tools, which he estimated to be worth about $60,000, but he saw them loaded into Hubbard’s trailer after being taken off the wall of the shop with a forklift.

Snowdon notes that it was difficult to determine the real value of the tools with the lack of documentation on purchase price and which tools were company-owned.

“One of the major problems the court had to manage in this dispute was extremely vague evidence on who owned what, what tools or items were taken, and the value of the items at issue,” he says. “Ultimately, it didn't make a finding on its value but just decided ‘What was the intention of the parties?’ It was to satisfy the severance requirements, and then to make a gift beyond that.”

Read more: Employment lawyer Stuart Rudner discusses the four myths of severance pay.

Seeking severance pay

Later, Hubbard learned about his Canada Labour Code entitlements and sued Laferriere and his company for severance pay in lieu of notice plus vacation pay. Laferriere countered that Hubbard agreed to accept goods whose value exceeded his severance pay entitlement instead of money.

The court found that Hubbard’s claim that he only took his own tools wasn’t credible, as he kept his own tools locked up. Other employees saw him take the tools that were on the shop wall and they were enough to require a forklift to carry them to Hubbard’s trailer. Hubbard also didn’t provide any evidence countering Laferriere’s estimates of the value of the tools or whether they were intended as severance pay or a gift.

The court also found that the conversation in which Hubbard asked if the tools were his severance was clear and Hubbard didn’t protest at the time. In addition, they were “on par in terms of business acumen and sophistication,” said the court in finding that Hubbard agreed to receive the goods in lieu of severance pay.

Without the need for an advance written agreement as required under provincial legislation, that conversation was enough to determine their intentions, says Snowdon.

“This is a situation where the employee asked, when he was being offered the equipment, ‘Is this my severance?’ And the employer said, ‘Yes, that's all I can offer.’ And then they shook hands.”

The court accepted evidence that the value of used tools depreciates to about 40 to 50 cents on the dollar, but with Laferriere’s estimated value of the tools that still provided Hubbard with about $30,000 in tools. The court found that Hubbard’s severance pay entitlement under the code, plus vacation pay, was $10,861, so Hubbard received a greater benefit than the mandatory minimum severance pay entitlement under the Canada Labour Code.

This decision should warn employers about the importance of documentation, even when there is a casual, friendly relationship between the employer and the employee, says Snowdon.

“It's a good reminder to have good documentation on personnel files, particularly around termination, and that close personal relationships that come out of long employment are often where employers begin treating things casually. If an employer intends to give a gift, it should be clear about that and there should be something in writing, such as a letter saying thank you for your years of service.”

See Hubbard v. 651398 British Columbia Ltd., 2022 ABPC 22.