Did company president resign or was he dismissed?

Alberta court rules in favour of a former company president whose duties were taken over by the company’s CEO

Larson v. Galvanic Applied Sciences Inc., 2005 CarswellAlta 438, 2005 ABQB 238 (Alta. Q.B.)

An Alberta court has ruled in favour of a former company president whose duties were taken over by the company’s chief executive officer.

Byron Larson joined Galvanic Analytical Systems in 1979. In 1996 the company joined Galvanic Applied Sciences Inc. and Larson became the president and a director of the company. He reported to Gerald Hipple, the CEO responsible for the restructuring that created the new corporation.

In May 2003 while Larson was at a trade show in British Columbia he learned Hipple had fired six employees. Larson testified he felt insulted and frustrated by the events. Staff reductions had been discussed, but nothing had been finalized, he claimed.

He called Hipple and told him he considered himself to have been constructively dismissed. Hipple responded by e-mail five days later, stating there continued to be a management role for Larson with the company.

Larson returned to work on June 2 and continued doing the things he’d done before the trade show. On June 27 he received a letter from Hipple: it denied Larson had been constructively dismissed but said Larson’s presence was making things awkward for all concerned. Larson was ordered to take a paid leave of absence until July 15.

Larson responded with a letter that stated the dismissal of the six employees was the “straw that broke the camel’s back” and his responsibilities as president had been taken from him.

Larson did not return to work and filed an action against the company.

The Alberta Court of Queen’s Bench found the evidence that Hipple’s actions, taken without consultation with the president of the company, was an erosion of and insult to Larson’s position. He had good reason to be upset but even then had returned to work and did his job.

His concerns about the firings may have been disruptive, but they did not constitute a fundamental breach of the employment relationship, ruled the court. At no time did he breach any of his obligations to the company.

The court did not accept, therefore, that Larson quit his job after being placed on the leave of absence. All the evidence established the company ended its relationship with Larson rather than he with it.

“His actions were not constructive resignation, his actions were those of a person who has been dismissed,” said the court.

The court added that the differences between Larson and Hipple may well have been irreconcilable, and it may have been in the best interest of the company that Larson’s role be ended. There was no just cause, however, and the company must pay compensation in lieu.

Larson was 53 when terminated. His efforts at mitigating his damages were unsuccessful.

The court awarded him 18 months’ salary in lieu at $8,400 plus benefits per month (or $151,200). He was also awarded a car allowance of $300 per month, a golf club membership of $333 per month, and a bonus payment of $10,000.

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