Requirement to buy shares showed expectation of long-term employment relationship
An Ontario employer must pay more than $300,000 to a former executive for wrongful dismissal, the Ontario Superior Court of Justice has ruled.
Bruce Rodgers, 57, had spent his entire professional career in the trucking, freight forwarding and logistics industry when he accepted a job offer with CEVA Freight Canada, a Mississauga, Ont.-based freight management and logistics company, in September 2009. The offer was for the position of country manager for Canada.
Before joining CEVA, Rodgers was president of another transportation company. CEVA recruited him for its Canadian operations after some negotiations. Rodgers' employment contract included a signing bonus, vehicle allowance and benefits such as health and life insurance. He was also subject to an “equity plan,” in which he was expected to purchase a certain amount of CEVA shares based on a percentage of his salary. This was because CEVA wanted its senior managers to have a stake in the company’s success. Rodgers borrowed $102,000 to purchase the shares and his financial advisors told him it was a good investment.
As part of the share purchase, Rodgers signed a shareholders agreement that included a restriction on interfering with customer relationships. This stated that for 12 months following termination of employment he could not contact or solicit CEVA customers.
The employment contract included a termination clause that stated “your employment may also be terminated by our providing your notice, pay in lieu of notice, or a combination of both, at our option, based on your length of service and applicable legal requirements.”
On June 28, 2012, CEVA terminated Rodgers’ employment. The company paid him two weeks’ salary in lieu of notice along with severance and vacation pay. His benefits were terminated two weeks later. He was also told his investment in CEVA shares remained “in the care of the company” and there was no process for him to exit by selling all his stock.
In April 2013, Rodgers received a letter from CEVA’s board of directors that
indicated CEVA stock no longer had value and it was unlikely shareholders would be able to recover their investment.
Rodgers sued for wrongful dismissal, adding that CEVA induced him from secure and long-term employment and then terminated him without cause or reasonable notice. CEVA disagreed that Rodgers was induced and argued the employment contract specified his notice would be determined by his length of service, which was less than three years.
The court found the employment contract did not give special emphasis to Rodgers’ length of service, as it only stated notice should be determined based on “all applicable legal principles,” and didn’t mention only length of service.
The court also found there was “some measure of inducement” that led Rodgers to leave his previous employment, as CEVA wooed him with an attractive financial package and signing bonus while he was still employed.
In addition, the court found Rodger’s age, the seniority of his position at CEVA and the fact he had worked in the industry for his whole career – thereby limiting his options of finding something similar after he left his old job – meant both sides could expect finding similar employment after his termination would be difficult. In addition, the fact Rodgers was required to purchase CEVA shares made it evident long-term employment was expected.
“I find that the required investment in CEVA Investments was intended to create the impression in the mind of (Rodgers) that by accepting employment with (CEVA) he would have a degree of job security beyond what would normally be anticipated,” said the court.
