No fundamental change

A share purchase and an amalgamation of an employer does not constitute constructive dismissal

For a number of years Hugh Pattillo had been employed as chief geophysicist at Beau Canada Exploration Ltd. In the fall of 2000 Murphy Acquisition Company Ltd., a subsidiary of Murphy Oil Company Ltd., purchased all of the shares of Beau Canada Exploration. They had 97 per cent of the shares by Nov. 3, 2000, and the remaining shares by Nov. 10, 2000. Also on Nov. 10 Murphy Acquisition amalgamated with Beau Canada Exploration and became Exploration.

On Nov. 6, 2000, Mr. Pattillo received a letter from Murphy Oil informing him of its intention to continue his employment as a staff geophysicist and that his employment would be transferred to Murphy Oil as of Jan. 1, 2001. He was not happy with the proposed new role and benefit package.

After extensive discussions with company executives he received a letter from Murphy Oil stating that Murphy Oil accepted what it considered to be his voluntary termination of employment. His last day of work at Exploration was Nov. 30, 2000. By Dec. 18, 2000, Mr. Pattillo found alternate employment as a chief geophysicist.

All other Beau Canada Exploration employees remained employees of Exploration until Dec. 31, 2000. On Jan. 1, 2001, all were transferred to Murphy Oil.

Mr. Pattillo brought an action in wrongful dismissal against Murphy Oil and Exploration. He argued that Murphy Oil’s takeover of Beau Canada Exploration and the resulting corporate structure had the effect of constructively dismissing him from his employment.

The Alberta Court of Queen’s Bench was faced with three issues:

• first, whether Murphy Acquisition’s purchase of Beau Canada Exploration shares had the effect of automatically terminating Mr. Pattillo’s employment;

• second, whether the amalgamation of Beau Canada Exploration and Murphy Acquisition had the effect of automatically terminating Mr. Pattillo’s employment; and

• third, whether Murphy Oil’s offer of continued employment to Mr. Pattillo had the effect of terminating his employment.

On the first issue Mr. Pattillo relied on previous case law which held that the sale of a business terminates its employment contracts. However the case law he referred to dealt with an asset sale as opposed to a share sale. The mere sale of a corporation’s shares does not terminate all employment contracts between that employer and its employees. When the shares of a business are sold the corporate employer continues to exist. The sale of shares does not alter the legal identity of the employer corporation, in this case Beau Canada Exploration.

On the second issue Mr. Pattillo argued that on amalgamation the “old” company ceased to exist and therefore any employment contracts were terminated. The Court held that on amalgamation the amalgamating companies are not extinguished and it does not result in the assignment or transfer of assets including employment contracts.

The Court did note that while the amalgamation in and of itself does not have the effect of terminating the amalgamating companies’ employment contracts, any new terms of employment or changes in remuneration, status or job duties that result from the amalgamation could amount to constructive dismissal. However this issue was not argued by Mr. Pattillo and was therefore not considered by the Court in determining whether Mr. Pattillo was constructively dismissed.

Finally Mr. Pattillo argued that his transfer from Exploration to Murphy Oil would change the legal status of his employer. He argued that he had a right to choose whether he wanted to work for Murphy Oil. The Court held that Murphy Oil and Beau, although separate legal entities, may be treated as a single employer due to their close relationship and common control over Mr. Pattillo’s employment.

A transfer within the Murphy Oil organization did not automatically trigger a termination of Mr. Pattillo’s employment. The transfer alone was not a fundamental change to the terms of his employment that would warrant a claim of constructive dismissal.

Mr. Pattillo’s claim was dismissed.

For more information:

Pattillo v. Murphy Canada Exploration Ltd., 2001 ABQB 1070.

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