Employer breached the employment contract

Constructive dismissal found as a result of a series of cumulative factors not actionable on their own

AT&T Capital Canada, Inc., a subsidiary of the American corporation AT&T Capital Corp., is active in the lease financing business. Prior to 1995 it was primarily involved in the “small-market” business which involves financing the leasing of assets with an average worth of about $12,000. In 1995 AT&T decided to enter the “mid-market” business which involves revenue-producing assets worth $100,000 and upward such as construction and manufacturing equipment.

In 1996 AT&T entered into discussions with Tino Kussman about developing this mid-market business. At that time Mr. Kussman was the regional manager for Western Canada for Newcourt Credit Group where he had responsibility for the company’s mid-market business. Their idea was to develop a vendor program whereby equipment manufacturers were encouraged to refer all their lease financing to AT&T for its contemplated mid-market division.

Mr. Kussman agreed to leave Newcourt Credit to work for AT&T. He was given two options for salary: he could receive a base salary of $93,000 with bonuses calculated at 10 per cent of gross profit in excess of $480,000 annually; or he could receive a base salary of $105,000 with bonuses calculated at 10 per cent of gross profit in excess of $600,000 annually. Mr. Kussman opted for the latter arrangement as he felt he could meet the higher sales or profit targets. He commenced his employment at the end of March 1996.

As a term of his employment, Mr. Kussman was entitled to hire an administrative assistant, which he did at a salary of just under $50,000 annually including fringe benefits. It was envisaged that his assistant, Ms. Hendry, would assist Mr. Kussman full-time because of the document-intensive nature of lease financing work.

Unfortunately the employment arrangement between Mr. Kussman and AT&T did not work well. Mr. Kussman was located in the Vancouver office where about 30 other persons worked in the existing small-market division. The provincial economy was not robust and the anticipated mid-market financing activity was slow to materialize. Mr. Kussman felt that the small-market group never really accepted him and that in some instances they were “poaching” on his area of business.

By August 1996 it was suggested to Mr. Kussman that if the financing activity did not show a marked improvement in the near term, he could expect a reduction in his base salary figure.

In December 1996 Mr. Kussman was told that because there had been no improvements, his base salary would be reduced in March 1997 to $93,000 with bonuses on gross profit in excess of $480,000 annually. He was not happy with this decrease. The vendor programs and the referrals from the small-market division had not materialized as he was led to believe during his job interview.

In addition to the reduction of salary there were problems with his assistant, Ms. Hendry. Mr. Vogan, a vice-president working out of the Toronto office, began to assign responsibilities to Ms. Hendry that cut into the amount of time she could devote to assisting Mr. Kussman.

In March/April 1997, Mr. Kussman received a directive from Mr. Vogan that Ms. Hendry would be devoting her time entirely to assisting Mr. Vogan. Mr. Kussman would have to make other arrangements. He endeavoured to find another suitable candidate but could not find anyone on the salary budget that he was given which was considerably less than he was given to hire Ms. Hendry. He tried to negotiate an arrangement with the small-market group to use their staff but was never given the budgetary allocation needed to facilitate this arrangement.

Between May and July 1997 another controversy arose which resulted in further deterioration of Mr. Kussman’s relationship with AT&T. A former independent contractor, Marv Sandrelli, was brought in as an employee. Prior to his becoming an employee, 25 per cent of his production was credited as a contribution to Mr. Kussman’s gross profit figures. When he joined the company Mr. Kussman gave him a substantial source of his own business in Vernon, B.C. In return an arrangement was worked out whereby Mr. Kussman was paid a cash commission on Mr. Sandrelli’s sales. This arrangement was summarily terminated in July by a senior vice-president despite the fact that Mr. Vogan had approved it.

At the end of July Mr. Kussman sought legal advice. As a result of the advice received, he informed AT&T that he felt he had been constructively dismissed and was leaving his position. He subsequently commenced an action against his employer.

At trial the Court found that AT&T breached the employment contract by reason of a number of cumulative factors and awarded damages for wrongful dismissal. AT&T appealed the finding.

The Court of Appeal upheld the finding of the trial judge. The Court held that Mr. Kussman was constructively dismissed as a result of cumulative factors including the unilateral salary reduction in March 1997, the removal of the services of his administrative assistant and the refusal to pay the agreed sum of money based on Mr. Sandrelli’s sales.

The Court of Appeal upheld the damages award of 12 months’ notice.

For more information:

Kussman v. AT&T Capital Canada Inc., 2002 BCCA 281.

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