Lack of written employment terms a problem for employer, say lawyers
In Boyer v. Callidus Capital Corporation, 2025 ONCA 79, the Ontario Court of Appeal (OCA) dismissed an employer’s appeal of a motion judge’s order finding that an employee was entitled to $1.8 million in damages for unpaid vacation, bonuses, and stock options.
The OCA found that the employer, Callidus Capital Corporation, was attempting to “repackage” the material facts of a counterclaim, which the court had dismissed in 2023, for damages for breach of fiduciary duty. Callidus alleged that the employee mismanaged three loans so the company could argue that the employee’s misconduct in connection with the three loans amounted to just cause for termination. The OCA found the employer was barred from doing so by issue estoppel, and that the preconditions for issue estoppel were met.
Callidus was a lender to distressed businesses in Canada and the US, while the employee was its Vice President of Underwriting and Portfolio Management from 2009 to 2016. His employment agreement was oral.
In addition to receiving a base salary, the employee participated in the company’s deferred bonus program and stock option plan. The employee was entitled annually to four weeks’ vacation.
Under the bonus program, Callidus withheld a portion of its employees’ bonuses, and would distribute 50 per cent of the withheld amounts in each of the two following years. The deferred portion accrued interest at the quarterly rate of three per cent.
It was the company’s usual practice to allow an employee’s entitlement to stock options to vest upon the employee’s departure.
Notice of retirement
In 2015, the employee notified Callidus that he would be retiring at the end of 2016. The employee claimed that, after providing this notice, he was treated in an abusive manner and his work environment was poisoned. At the end of the summer of 2016, the employee’s accounts were transferred to others. The employee then asked to take 24 weeks of accrued vacation, but Callidus denied his request.
In September 2016, the employee provided a letter to his employer stating that he had no choice but to retire early because his work environment had become increasingly toxic and he was being treated in an abusive manner. The letter also noted that the company did not honour the employee’s entitlement to accrued vacation pay or compensate him on termination for his deferred bonus and unvested options.
In Boyer v. Callidus Capital Corporation, 2023 ONCA 233, the OCA dismissed Callidus’ counterclaim for damages for breach of fiduciary duty based on allegations the employee mismanaged three loans.
The motion judge made the following findings:
Constructive dismissal: The employee failed to prove Callidus committed an act or engaged in conduct amounting to constructive dismissal. The employee retired and was not entitled to damages for wrongful dismissal.
Accumulated and unused vacation: An employee’s entitlement to vacation or pay in lieu is fundamental to a contract of employment. There was no written record or evidence that it was communicated to the employee that he was required to take vacation annually and could not carry his entitlement over to subsequent years. The employee was entitled to damages in the amount of $93,076 for 22 weeks of unused and accumulated vacation at the time of his retirement.
Deferred bonus: No evidence was tendered to show the employee was provided a copy of the Deferred Bonus Policy or told he would not receive any amount for deferred compensation if he was not employed when payment became due, or that the employee agreed to this as a condition of his employment.
The employee is entitled to damages for unpaid and deferred bonus amounts that were awarded to him for 2014 and 2015 ($525,000) plus three per cent quarterly interest on the deferred amounts to the date of the decision.
Stock options: The employee had an oral contract of employment. The employee’s evidence that his superior confirmed his stock options would vest upon his retirement was accepted. This confirmation became a term of his employment contract.
The employee was entitled to damages in the amount of $1,213,856 to compensate him for the value of his stock options, calculated by the difference in value between the grant price of each option award and the market price as of Jan. 16, 2017, the date the employee would have exercised his vested options.
Employer appeals benefits award, asserts just cause
Callidus argued the motion judge committed the following reversible errors in holding:
- The employee was entitled to the benefits awarded.
- Issue estoppel barred the determination of allegations of just cause dismissal Callidus sought to assert.
- The relief granted was not appropriate for summary judgment.
The employer argued the motion judge erred when he held the employee was entitled to the benefits he was awarded because the claims were not properly pleaded and the evidence filed on the summary judgment motion did not support the relief granted.
The OCA was not persuaded by this ground of appeal, finding:
- Callidus had “ample opportunity to understand, test, and respond to the fundamentals of the claims asserted by [the employee] as framed by” the employee’s statement of claim and amended statement of claim, affidavits, cross-examinations, refusals and undertaking charts, and by the employee’s testing of the employer’s evidence.
- The motion judge “dealt extensively” with the record and “clearly explained how he exercised his powers to weigh evidence, evaluate the credibility of a deponent, and draw reasonable inferences from the evidence.”
In response to the employer’s argument that the motion judge erred by limiting its ability to further expand the record on the stock option issue, the OCA held it was not an error for the motion judge to ensure that if he exercised his discretion to expand the record, it would be done in a procedurally fair manner.
Just cause argument ‘repackaged’ from previous counterclaim
In the 2023 appeal, the OCA found Callidus failed in its counterclaim to plead the required elements at law or factual details required to support its claim of breach of fiduciary duty, and it dismissed this counterclaim. The company then delivered an Amended Statement of Defence and Counterclaim in which it argued the employee’s misconduct in connection with the three loans constituted breaches of his employment duties and responsibilities amounting to just cause for termination.
The OCA reviewed legal principles establishing that when an employer terminates a contract of employment without cause, it is required to give the employee reasonable notice, or pay in lieu of reasonable notice, unless it has just cause. The OCA then found that because the motion judge rejected the employee’s constructive dismissal argument, Callidus’ just cause defense was not relevant. The OCA recalled that in the 2023 appeal it dismissed the company’s counterclaim and found Callidus was now attempting to “repackage” the material facts of this dismissed counterclaim so it could litigate its just cause defense in the future. The OCA held this would be an abuse of the decision-making process barred by issue estoppel, and that the preconditions for issue estoppel were met.
The OCA also found the summary judgment procedure was appropriate for the employee’s claim and held the motion judge did not err when it dealt with the employee’s claim on a summary judgment motion. Noting once again that Callidus’ just cause defense was irrelevant and, in any event, barred by issue estoppel, the OCA characterized the employment contract claim as of “modest complexity” and found the paper record permitted the motion judge to make a determination on the merits.
Written terms of employment
The OCA’s decision in Callidus Capital, in which the parties had an oral employment agreement, highlights the importance to employers of recording in writing any terms that limit an employee’s entitlements, particularly when they pertain to the vesting or forfeiture of equity compensation. In this case, the OCA resolved a dispute involving equity compensation, among other things, at great expense to the employer.
The decision also encourages employers appealing a lower court’s decision to avoid attempting to “repackage” the material facts of a claim the appeal court has already dismissed because, provided the required preconditions are met, they may be barred from doing so by the legal doctrine of issue estoppel.
Employers should take care when drafting employment agreements, policies and plans to ensure they accurately represent the terms and conditions of the employee’s employment and are properly communicated to their employees.
If an employer wants to change the terms of an employee’s employment, or a policy or plan that applies to them, it should be appropriately documented and confirmed.
Employers are also encouraged to review their employment agreements, policies, plans, and communication practices on a regular basis and update them when required.
In all cases, employers are encouraged to seek the guidance of experienced employment counsel when drafting and reviewing their employment agreements, policies, plans, and communication procedures.
Rhonda B. Levy is knowledge management counsel at Littler Mendelson P.C. in Toronto. Matthew P. Badrov is a partner at Littler Mendelson P.C. in Toronto. Oren Barbalat is an associate at Littler Mendelson P.C. in Toronto.
