Director of underperforming facility couldn’t improve existing problems in less than 2 years
The Canadian subsidiary of a U.S. company must pay an employee who it asked to transfer from the U.S. to Canada more than $80,000 in wrongful dismissal damages.
Thomas Kurtz, 55, was a director of operations in California for Carquest, an auto parts distributor, beginning in July 2005. While in California, Carquest considered him to perform at or above company standards.
In January 2009, Carquest closed Kurtz’s distribution centre and consolidated it with others. The company offered Kurtz the director of operations position at its distribution centre in Rexdale, Ont. Kurtz accepted and moved to Canada, starting in his new position on May 1, 2009.
However, the Rexdale distribution centre was much larger and had poor relations between management and staff, due partly to an unsuccessful union-organizing drive, which also caused divisions among the staff. The payroll budget was also too high and the facility’s conveyer system was experiencing problems. In addition, there was a shortage of storage space after a new mezzanine area was built at the distribution centre but couldn’t be used until municipal approvals were given in July 2010.
Carquest began a process of converting distribution centres from a paper-based inventory control system to electronic systems based on digital scanning, called DCMS. The technology allowed distribution centres to control inventory more efficiently and simplify the job of locating and retrieving auto parts to send to retail stores.
The Rexdale facility converted to the DCMS system over a few months from October 2009 to February 2010. Kurtz had no prior experience with the new system, since his distribution centre in California hadn’t converted before it closed.
New position inherited existing long-term problems
In 2009, Kurtz was given a passing score in the company’s performance management process, as the facility’s problems were deemed beyond his control when he arrived. However, the facility continued to operate below company standards and Kurtz was given coaching and assistance from managers.
The company established a baseline for performance of the distribution centre under Kurtz’s leadership for 2009 and gave it a “fail” with a list of areas needing improvement. Kurtz was also given a notice of performance counselling in April 2010 identifying specific concerns from the performance review. It was called a “final warning,” though he hadn’t received any prior warning under the company’s progressive discipline policy — which stipulated an initial coaching session should be given, followed by two counselling sessions before termination was considered.
Carquest issued Kurtz a performance management process notice in July 2010 noting the Rexdale facility wasn’t meeting corporate requirements, but the notice wasn’t considered a disciplinary document. However, a little over one month later, Kurtz was given a corrective counselling form indicating there were “multiple performance items that have still not improved and others that are new and contributing to the downward performance of this distribution centre.” The form indicated “this serves as a final written warning for performance… The above-mentioned items require immediate attention and remarkable improvement as soon as possible, failure to do so will result in immediate termination.” The notice was followed up by upper management, who told Kurtz to “do what you know you have to do.”
Between June and December 2010, Kurtz received several emails from upper management indicating Carquest’s unhappiness with the performance of the distribution centre. By September, the company was actively searching for a replacement director of operations, which it hired in December. By the end of 2010, the Rexdale facility was still performing poorly and had actually gotten worse in every metric except for one that had already been bad.
On Jan. 10, 2011, Carquest terminated Kurtz’s employment for poor performance and failing to meet its company-wide “gold standards,” of which Kurtz and all operations managers had been made aware. Kurtz sued for wrongful dismissal.
The court found Carquest “had a valid business reason” to dismiss Kurtz — hiring another director of operations that could improve the Rexdale facility performance — and its gold standards were reasonable and applied objectively across the company. However, it also found Carquest didn’t properly warn Kurtz that his substandard performance could result in dismissal, nor did the company give him reasonable time to fix the problems.
It was a fact that the Rexdale facility was in poor shape when he took it over, with “significant ongoing problems” already existing and “indicative of long-term problems that needed time, care and attention to resolve.” When the April 2010 notice was named a final warning, it was “obviously inaccurate and misleading” and expecting significant improvement of long-standing issues without further assistance was unreasonable, said the court.
Following that notice, the four months before Carquest began looking for a replacement wasn’t enough time to see if things could improve and was “an indication that the company had written off Mr. Kurtz as a Carquest asset and had no interest in assisting him in solving the existing problems,” the court added. As a result, the court found Kurtz was wrongfully dismissed.
Kurtz was 50 years old at the time of dismissal with five-and-one-half years of service in a senior management position, so the court found Kurtz was entitled to eight months’ notice including salary, benefits, car allowance, vacation pay and Canadian taxes. The court denied Kurtz’ claim for punitive and moral damages, determining that Carquest’s conduct and the manner of dismissal, though resulting in wrongful dismissal, was not egregious or in bad faith.
Minus an amount Carquest successfully counterclaimed for taxes it paid to offset the difference in Canadian and U.S. taxes while Kurtz received a refund, the total amount Carquest was ordered to pay Kurtz was $83,168.34.
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