Employer on hook for US$2 million severance pay, unpaid salary under agreement
The British Columbia Supreme Court has awarded nearly US$3 million to an executive after his former employer claimed that he resigned from his employment after expressing his displeasure over contract negotiations.
The 75-year-old worker was an executive for Western Magnesium Corporation, a producer of magnesium metal based in Vancouver with headquarters in the US. He was employed under a written executive employment agreement with a termination provision that entitled him to US$2 million in severance pay if the company terminated his employment.
After seven years with Western, the worker was negotiating a new contract with Western and had some concerns. Three months after Western executed the new contract, he called the company and left a voicemail saying that the company’s contract offer was open-ended and he wanted a fixed term because he couldn’t keep working “beyond a point in time, and I set that at three years, with a three-year option at my choice.” The worker added that if he was unable to keep going, he wouldn’t.
The worker also said that “if I have to sign this existing contract that is open-ended, you will have a letter of resignation dated three years from the date of the contract.”
Salary, communications stopped
After this, Western stopped communicating with him and hired new staff that started performing the worker’s duties. The company also didn’t pay him after that and subsequently voted him in as director without advising him.
The worker sued for wrongful dismissal, seeking damages for termination of his employment agreement, non-payment of salary, reimbursement of expenses, severance pay, and indemnification for legal fees related to directors’ and officers’ insurance.
Western argued that the worker resigned from his employment, based on his voicemail that stated he would provide a letter of resignation, and was not entitled to any damages. It agreed to compensate him for his services under the contract, but that didn’t happen.
The worker applied for summary judgment, as it was a straightforward breach-of-contract case and neither party disputed the terms of the employment agreement or entitlement to compensation. However, it did not appear in the hearing for the worker’s application.
The court found that there was a written employment agreement and Western and the worker were the only parties to it. It was also undisputed that the contract was ended.
No clear resignation
The court disagreed with Western that the worker’s voicemail message was a resignation, as the worker clearly stated that he would work for three more years – whether as the fixed-term contract or before the effective date of his resignation. Without a resignation, it was Western who terminated the contract, said the court.
The court also found that the company changed the terms of his employment without consulting him by introducing the open-ended contract and electing him as director. In addition, the failure to pay him and the cessation of communication all contributed to what was a constructive dismissal, the court said.
The court also found that there was no evidence of just cause and Western did not provide any notice of termination. This made it a wrongful dismissal, said the court.
As for the worker’s reasonable notice entitlement, the court noted that re-employment at age 75 at the level of executive compensation the worker received with Western would be difficult. The worker’s field of expertise was “specialized and unique” and Western profited from that expertise, said the court, adding that shutting the worker out had an emotional impact on the worker.
The court determined that the worker was entitled to seven months’ pay in lieu of reasonable notice.
The court also found that the company’s defense was meritless and chose not to attend the summary judgment hearing, which caused the worker to incur additional legal costs. This was “reckless indifference” to the claim and warranted a special costs award, said the court.
Western was ordered to pay the worker more than US$600,000 in delayed and unpaid salary and other compensation under the employment agreement, US$2 million severance pay under the employment agreement, more than US$83,000 in legal fees, US$175,000 for seven months’ pay in lieu of notice, and special costs. See Sever v. Western Magnesium Corporation, 2023 BCSC 1833.
