Company claimed just cause with false allegations of fraud and theft; award includes $35,000 in aggravated damages
A British Columbia employer must pay $167,000 to a former executive it fired with false accusations of fraud and theft.
Central City Brewers & Distillers operates a brewery, restaurant and liquor store in Surrey, B.C. It hired Daryl Hrynkiw, 58, in March 2012 as a controller as it was expanding its operations and planning on moving the brewery to a new building.
In Hrynkiw’s initial job interview, Central City’s president and CEO said he couldn’t match the salary Hrynkiw earned in his previous position, but there would be opportunities for future growth as it expanded the business. At a second interview, Hrynkiw said the starting salary was much less than what he wished to earn and the CEO once again mentioned the opportunity for growth.
The CEO emailed Hrynkiw following the second meeting and confirmed the terms of the offer of employment. Hrynkiw accepted with no formal written employment contract.
In December 2012, the CEO told Hrynkiw that he would like to promote him to the position of chief financial officer. He didn’t offer any salary increase but agreed to give him an additional $25,000 per year in the form of a share bonus — a cash payment with the understanding that Hrynkiw would use the company to purchase shares in Central City’s venture capital corporation. The capital corporation would in turn purchase shares in the brewery.
The annual share bonus payment required the CEO’s signed approval — the standard procedure was for Hrynkiw to get the CEO’s verbal approval and advise the payroll office, after which a payroll administrator would prepare a payroll change form for the CEO’s signature.
Hrynkiw believed the share bonus was a form of guaranteed compensation, but the CEO felt it was performance based and, although there were no performance metrics, he subjectively assessed Hrynkiw’s job performance each year.
Bonus increase instead of pay raise
In May 2016, Hrynkiw asked the CEO for a pay raise. The CEO acknowledged that Hrynkiw was underpaid, so they agreed to a $25,000 increase in Hrynkiw’s salary, but they differed on whether Hrynkiw received a $25,000 increase in the share bonus. The continued lack of a written agreement didn’t help the confusion and no payroll change form was prepared to reflect a bonus increase.
In January 2017, Hrynkiw requested just over $41,000 in share bonus — the original $25,000 plus a prorated portion of the additional $25,000 he had been granted the previous May. The CEO verbally approved it, a payroll administrator drew it up and the CEO signed off on it. Hrynkiw then purchased shares in the venture capital corporation.
In late 2017, Hrynkiw requested a prorated portion of his share bonus — just over $42,000 to Nov. 5 — early because he had share purchase warrants that expired at the end of December. He obtained verbal approval, but the payroll administrator wrote a cheque before the CEO signed a payroll change form. The CEO later signed share certificates for the shares Hrynkiw purchased with the bonus, but he didn’t realize it was from that bonus and he claimed he didn’t recall discussing that amount of money.
In May 2018, the CEO advised Hrynkiw that his role would be changing. Central City was promoting a financial analyst to the position of vice-president of finance and Hrynkiw would report to her. The CEO explained that the new VP would be better able to take the lead during financial growth, but Hrynkiw’s compensation and title of CFO wouldn’t change.
Hrynkiw was shocked and felt betrayed that his responsibilities were being changed and he would have to report to an employee who had been under him before. He felt he was the CFO in name only, which he felt was confirmed when an internal organization chart referred to him as controller.
The following month, Hrynkiw told a payroll administrator that he planned to ask for approval for a share bonus payment so he could take advantage of a special share price. The administrator advised the new VP of finance, who asked the CEO about it. The CEO asked her to look up the payments Hrynkiw had received in 2017, which turned out to be $83,000. The CEO was surprised at the amount.
The CEO confronted Hrynkiw about the amount and Hrynkiw tried to explain that it covered two years of bonus payments. He prepared a spreadsheet setting out the calculations for 2016, 2017 and the first half of 2018, but the CEO insisted he never would have agreed to a $50,000-per-year bonus share payment.
On Thursday, June 28, the CEO came to Hrynkiw’s office to discuss it some more, but he received a call on his cellphone and asked Hrynkiw to wait. Hrynkiw waited about two hours, and then left for lunch. When the CEO found him gone and texted him, Hrynkiw said he would be “back in a bit.” However, Hrynkiw turned off his cellphone and didn’t return that day, wanting to give the CEO a chance to calm down.
By the end of that day, the CEO texted Hrynkiw instructing him not to return to the office unless he was there. He suggested an afternoon meeting four days later. He also cut off Hrynkiw’s security access to the office and his work email.
That weekend, Hrynkiw went to the brewery’s retail store to pick up a keg of beer he had ordered. On Tuesday, July 3, Hrynkiw emailed the VP of finance to say he was taking the rest of the week off and he texted he CEO to say he would notify him about a meeting “by week’s end.”
Allegations of just cause
After not hearing from Hrynkiw by July 6, the CEO sent a termination letter to Hrynkiw’s personal email address. The letter stated that Hrynkiw had paid himself unauthorized share bonus payments and tried to do it again in June 2018. It also alleged that he had visited the office over the previous weekend while picking up the keg of beer to remove or copy documents when he knew his access had been cancelled.
Hrynkiw sued for wrongful dismissal, claiming the bonus share payment amounts had been approved.
The B.C. Supreme Court found that the CEO agreed to the bonus share increase to $50,000 per year in May 2016. The CEO approved the payment for 2016 in January 2017 and the payment for 2017 in December 2017, and the payroll administrator processed the payments. The CEO’s denial that he approved the increase wasn’t plausible in the face of the company’s own documents as well as the fact that it had been noted previously that Hrynkiw was underpaid — and Central City didn’t bother examining payroll records or conduct a proper investigation into the bonus share situation. The evidence also supported the argument that Hrynkiw did not engage “in a deliberate scheme” to get additional bonus payments, said the court.
Since the bonus share increase was approved, there was no misconduct in relation to the bonus payments. Even if there was, the fact that the employment contract was oral only and the CEO didn’t review budgets or payroll records carefully created the potential for misunderstanding, which also wasn’t cause for dismissal, said the court.
In addition, the court found that when Hrynkiw went to the Central City retail store, he didn’t violate the direction not to attend the office and there wasn’t any evidence to support the allegation that he went into the office or took any documents.
The court determined that Central City did not have just cause for dismissal and, considering Hrynkiw’s age, skills and position as CFO, he was entitled to 12 months’ notice of termination plus his share bonus for 2018 up to the date of his dismissal.
Central City was ordered to pay Hrynkiw compensation equal to 12 months’ pay and benefits, unused vacation, pro-rated share bonus compensation and $35,000 in aggravated damages for its bad faith in pushing its unfounded allegations of theft and fraud. The total award was $166,945.55.
For more information, see:
- Hrynkiw v. Central City Brewers & Distillers Ltd., 2020 BCSC 1640 (B.C. S.C.).
