Company knew employee’s job was at risk when it executed leave of absence agreement that deemed a resignation if no position was available upon his return
An Alberta senior manager whose position was eliminated while he was on a six-month leave of absence deserves 22 months’ pay in lieu of notice plus $20,000 in punitive damages for his employer’s conduct in his dismissal, the Alberta Court of Queen’s Bench has ruled.
Hans Jonasson, 59, was hired in 1992 for an Alberta oil and gas company that was later acquired by Calgary-based oil and gas company Nexen. Jonasson worked in reservoir engineering with postings in three different countries. In 2011, he completed a posting in the United Kingdom and took a two-month leave of absence before returning to a position as a senior manager in Nexen’s technology group in Calgary.
In early 2013, Nexen hired a consultant to assess its senior management ranks. The consultant determined that the company was top-heavy and recommended the company cut certain levels of middle management — including many in Jonasson’s pay grade. Around the same time, Nexen was acquired by an international corporation and became a wholly-owned subsidiary of that corporation.
In May 2013, Jonasson entertained the thought of either retiring or taking a leave of absence. He met with a member of Nexen’s human resources department to discuss his options and get some information about the company's policy on leaves of absence. The HR member told him that with the uncertainty of the corporate takeover, there was no guarantee Jonasson would have a job to return to if he took a leave of absence. The HR member was aware Nexen was considering cutting senior staff, but didn’t mention it to Jonasson as it was in the early stages of planning. Only a small group of top-level managers knew about it and they didn't want rumours and misinformation to spread before they had a concrete plan in place.
In late May, the vice-president in charge of the technology group held a meeting with employees in which he expressed optimism about the takeover, noting that the new parent corporation placed a high priority on the type of research and development done by the technology group. However, one month later Nexen’s executive team decided that senior management ranks should be reduced by 24 per cent.
In the meantime, Jonasson decided he didn’t want to retire, so he requested and was approved for a seven-month leave of absence running from Oct. 1, 2013, to April 1, 2014. Jonasson and the vice-president — neither of whom were yet aware of the impending job cuts — signed a leave of absence agreement that stated Nexen would “make reasonable efforts to find me a suitable role within the organization upon my return to active duty,” though the company “is under no obligation to return me to my original position or one of equivalent level.” The agreement further stipulated that if a suitable role wasn’t found after reasonable efforts were made to find one, or Jonasson declined an offer for a suitable role, Nexen would consider him to have resigned and he would not be eligible for “any severance, termination payment, bonus, or any other provision, including any company sponsored benefits.”
In addition to the agreement, Nexen’s leave policy stated that it expected employees on leave to avoid other employment unless approved.
Employee’s job identified as potential cut before leave began
Shortly before Jonasson went on leave, Nexen’s senior HR officials began identifying senior managers who could potentially be let go. The list was fluid and kept changing, but Jonasson’s name made it to the first list and remained on it thereafter because there were higher-rated managers on the chopping block for whom the company was trying to find alternate positions.
Jonasson began his leave on Oct. 1 and Nexen divided his job responsibilities among other employees. Jonasson remained on the cut list and the company tried to find placements for some of the individuals on the list, but not any special efforts for Jonasson. It also became apparent while Jonasson was on leave that the company could function without him, so when the final cut list was determined in January 2014, Jonasson was on it.
Nexen decide to officially cut Jonasson’s position on April 1, the day he was scheduled to return from his leave of absence. The vice-president called Jonasson in Arizona — where he was spending his leave — on March 3 to tell him his employment would end as of April 1 with no severance payment, as the company treated it as a deemed resignation under the leave of absence agreement. The company wanted to inform him in advance to give him the choice of staying in Arizona rather than coming back to no job.
Jonasson was surprised since the leave of absence agreement required Nexen to make a reasonable effort to find him a position upon his return. He contacted several people at Nexen to find out what happened and if he had been considered for other positions.
The court found the leave of absence agreement wasn’t binding, as Nexen was aware that deep cuts to management were pending, while Jonasson was not. The company also knew Jonasson’s name was on the cut list before he left on his leave of absence and it was likely no efforts to find him a role would be successful, but said nothing — and in fact it took steps to keep the news secret until it was ready to reveal its plans to employees, said the court.
The court also found that the leave of absence agreement’s allowance for a deemed resignation against Jonasson’s wishes resulted in him retroactively waiving his entitlement to notice and severance “under circumstances unknown to the employee.” This made the agreement contrary to Alberta’s Employment Standards Code and therefore void, the court said.
Considering Jonasson’s age, his 22 years of service with Nexen and its predecessor, the importance of his position, and the limited transferability of his recent experience and knowledge — his final three years at Nexen were spent developing a new technology that wasn’t ready for field use — the court determined Jonasson was entitled to 23 months’ notice of dismissal. In addition to liability for the notice period, Nexen was ordered to pay Jonasson $20,000 in punitive damages — a “little more than nominal” amount for Nexen’s conduct that wasn’t malicious, but “displayed an outrageous degree of negligence” toward Jonasson — “just sufficient to send a message of denunciation and deterrence,” the court concluded.
For more information see:
• Jonasson v. Nexen, 2018 CarswellAlta 1907 (Alta. Q.B.).
