Employer makes leave of absence permanent

Knew senior manager’s job was at risk when it executed agreement: Alberta court

An Alberta senior manager whose position was eliminated while he was on a six-month leave of absence deserves 22 months’ pay in lieu of notice, plus $20,000 in punitive damages for his employer’s conduct, the Alberta Court of Queen’s Bench has ruled.

Hans Jonasson, 59, was hired in 1992 by an Alberta oil and gas company that was later acquired by Calgary-based oil and gas company Nexen. He worked in reservoir engineering and in 2011, he completed a posting in the United Kingdom, then took a two-month leave of absence before returning to his job as a senior manager in Calgary.

In early 2013, Nexen hired a consultant to assess its senior management ranks, who determined the company was top-heavy and certain levels of management should be cut — including many people in Jonasson’s pay grade.

Around the same time, Nexen was acquired by an international corporation and became a wholly owned subsidiary.

In May 2013, Jonasson considered retiring or taking a leave of absence. He met with a member of human resources to discuss his options.

The HR member told him that with the uncertainty of the corporate takeover, there was no guarantee Jonasson would have a job to return to.

The HR member was aware Nexen was considering cutting senior staff, but didn’t mention it to Jonasson as it was in the early stages and only a small group of top-level managers knew about it.

In late May, an executive held a meeting in which he expressed optimism about the takeover, noting that the new parent corporation placed a high priority on the research and development of the group. However, the next month, Nexen’s executive team decided senior management ranks should be reduced by 24 per cent.

In the meantime, Jonasson requested and was approved for a leave of absence from Oct. 1, 2013, to April 1, 2014. He and the vice-president — neither of whom were yet aware of the impending cuts — signed a leave of absence agreement that stated Nexen would “make reasonable efforts to find me a suitable role within the organization upon my return to active duty,” though the company “is under no obligation to return me to my original position or one of equivalent level.”

The agreement further stipulated that if a suitable role wasn’t found or Jonasson declined such an offer, Nexen would consider him to have resigned and he would not be eligible for “any severance, termination payment, bonus, or any other provision, including any company-sponsored benefits.”

Shortly before Jonasson went on leave, HR began identifying senior managers who could potentially be cut, and Jonasson’s name was on the list.

Jonasson began his leave on Oct. 1 and Nexen divided his job responsibilities among other employees. Jonasson remained on the cut list and the company tried to find placements for some of the individuals on the list, but made no special efforts for Jonasson.

It also became apparent while Jonasson was on leave that the company could function without him, so when the final cut list was determined in January 2014, Jonasson’s name was on it.

Nexen decide to officially cut Jonasson’s position on April 1, the day he was scheduled to return from his leave of absence. The vice-president called Jonasson in Arizona — where he was spending his leave — on March 3 to tell him his employment would end as of April 1 with no severance payment, as the company treated it as a deemed resignation under the leave of absence agreement.

Jonasson was surprised since the leave of absence agreement required Nexen to make a reasonable effort to find him a position upon his return. He contacted several people at Nexen to find out what happened and if he had been considered for other positions.

The court found the leave of absence agreement wasn’t binding, as Nexen was aware that deep cuts to management were pending, while Jonasson was not.

The company also knew Jonasson’s name was on the cut list before he left on his leave of absence and it was likely no efforts to find him a role would be successful, but it said nothing — and in fact it took steps to keep the news secret until it was ready to reveal its plans to employees, said the court.

The leave of absence agreement’s allowance for a deemed resignation against Jonasson’s wishes also resulted in him retroactively waiving his entitlement to notice and severance “under circumstances unknown to the employee,” said the court.

This made the agreement contrary to Alberta’s Employment Standards Code and, therefore, void.

Considering Jonasson’s age, 22 years of service, the importance of his position, and the limited transferability of his recent experience and knowledge — his final three years at Nexen were spent developing a new technology that wasn’t ready for field use — the court determined Jonasson was entitled to 23 months’ notice.

In addition to liability for the notice period, Nexen was ordered to pay Jonasson $20,000 in punitive damages — a “little more than nominal” amount for Nexen’s conduct that wasn’t malicious, but “displayed an outrageous degree of negligence” toward Jonasson — “just sufficient to send a message of denunciation and deterrence,” said the court.

For more information, see:

Jonasson v. Nexen, 2018 CarswellAlta 1907 (Alta. Q.B.).

Jeffrey R. Smith is the editor of Canadian Employment Law Today. For more, visit www.employmentlawtoday.com.

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