Sometimes, employment law makes big headlines. That was the case recently after an arbitrator handed down his ruling in the high-profile severance case involving David Dingwall, former president and CEO of the Royal Canadian Mint and a former MP who served as a cabinet minister under former Prime Minister Jean Chrétien.
The arbitrator’s decision shows Dingwall was pressured by then Prime Minister Paul Martin to step down in the media firestorm that followed after some of his expenses as head of the Royal Canadian Mint became public.
But when all the talk of former PMs and MPs is stripped away, what’s left is a very relevant lesson for employers. Dingwall’s case boils down to one of constructive dismissal.
George Adams, the arbitrator in this case, began by posing two questions: Was Dingwall’s resignation voluntary or involuntary? And, if the resignation was involuntary, what was Dingwall owed in terms of compensation and damages?
Dingwall’s decline
Dingwall was appointed to his position with the Royal Canadian Mint on April 1, 2003, for a five-year term. Before that, since 1997, he had conducted a government relations and strategy consulting practice. Prior to that, he had been a member of parliament from 1980.
While an MP, Dingwall served in a number of cabinet positions including Minister of Health and Minister of Public Works and Government Services. It’s no secret that Dingwall was close to Chrétien and that when Paul Martin took over that closeness became a bit of a liability. In fact, by the time Dingwall resigned from the Mint, he was the last remaining Chrétien cabinet minister appointee to public office.
Dingwall a top-notch CEO
When Dingwall took over the Mint in 2003, it was a money-losing proposition. There were serious labour relations problems and the Canada Revenue Agency (CRA) was conducting five audits.
He led a restructuring of the organization, encouraged and supported the resolution of its labour relations and CRA problems and the Mint achieved a pre-tax profit of $15.9 million in 2004.
“His leadership provided the opportunity for a positive change in the Mint’s culture that was well received by the Mint’s board, its management and its staff,” said the arbitrator. “During Dingwall’s tenure, the business grew by over $105 million and increased employment opportunities in Winnipeg and Ottawa by almost 200 people.”
As a result of his high performance, Dingwall enjoyed substantial performance awards. The board of directors approved a salary increase to $253,200 in 2004 and a performance award of $37,980. He expected to enjoy comparable increases and performance awards during the balance of his five-year term, which was to end in April 2008.
Problems begin to surface
Trouble started brewing in the fall or 2005. While Dingwall was away on business in Indonesia, he was told of government concern about media coverage of his lobbying activities. The media reports were wrong and Dingwall assured the government there was nothing improper about his earlier activities as a consultant.
Shortly after that, opposition MPs in the House of Commons made serious allegations about his expenses as president and CEO of the Mint. The allegations, which the arbitrator called unsubstantiated, made headlines across the country.
“Effectively, all of the expenses of Dingwall’s office ($730,000 approximately) involving several other employees were being attributed to him,” the arbitrator said. “In fact, well over 70 per cent of these approved expenditures related to the other employees and two subsequent independent reviews (subsequent to Dingwall’s departure) confirmed the propriety of the expenditures and the governance mechanisms in place to approve and monitor such expenses.”
The timing of the attack was particularly problematic for the government because of an impending election. On Sept. 27, 2005, Dingwall received a call from the minister responsible for the Mint berating him for having to deal with an expense-related issue at such a delicate time.
Dingwall, an experienced politician, understood what was happening and realized there would be no support from the government regardless of the complete absence of wrongdoing on his part. He had become a political hot potato that it wanted no part of this close to an election.
“It was apparent that he would be sacrificed (he said ‘a bullet was coming’) and then he would spend years in court trying to clear his name and seeking fair compensation for an unjust termination,” the arbitrator said. “Dingwall realized he had no choice but to make the best arrangement to leave that he could.”
On Sept. 28, the details of a mutually acceptable departure package were worked out. Dingwall then called Prime Minister Martin and told him he “felt compelled to step down” and why. Martin did not disagree with Dingwall’s assessment or encourage him to stay on.
The paperwork was taken care of and an announcement about Dingwall’s resignation was put out before question period in the House of Commons on Sept. 28.
Government balks at severance
But things again took a turn for the worse, from Dingwall’s point of view. Suddenly, the government decided not to honour the severance pay that had been agreed upon.
The announcement that was put out on Sept. 28 concerning his resignation was intended by him to minimize any possible embarrassment to the government, something not uncommon in the case of the departure of senior executives in both the private and public sector.
Dingwall said he suffered personally and professionally because of the government’s decision not to publicly acknowledge its role in his departure and its involuntary character. He has not received any income from employment since his departure or any money under his MP’s pension or his pension from the Mint. And he was not given professional job placement assistance in his search for other work as would be usual in the case of the termination of a senior executive.
Resignation forced
The arbitrator said there was no doubt the resignation was “clearly involuntary.” Dingwall was not planning to leave the Mint in the fall of 2005.
“There was no basis to the criticisms leveled against him but no one in the government was prepared to listen to him or inquire fairly,” the arbitrator said. “Several former Chrétien cabinet ministers had lost their jobs and were involved in very public (and expensive) litigation. No one disagreed with his assessment that he was next. No one suggested that he would be defended or that the allegations would be the subject matter of a rational resolution process before he was required to do anything. Instead, he was offered terms agreeable to him in the circumstances if he was prepared to go co-operatively and quickly. He was encouraged to announce his departure before question period on the very day he had decided to depart – a time that preceded the formal approval of the terms that had been negotiated with him and on which he had relied in submitting his resignation.”
The arbitrator said the fact that politics is a “blood sport” might explain the government’s subsequent conduct in refusing to approve his severance, but it was not justifiable. Dingwall had performed his job well. He was entitled to the government’s rational support when serious charges concerning his expenses were made against him. If the government was unwilling to provide that support, for whatever reason, then it had an obligation to end the employment on equitable terms.
Dingwall awarded $417,000
The arbitrator awarded Dingwall 18 months’ salary ($379,800) and 10 per cent of that amount ($37,980) in lieu of benefits for a lump-sum total of $417,780. It also awarded him an annual allowance of $42,010 and ordered the government to pay Dingwall’s legal costs on a total indemnity basis.
The voluntary resignation test
The test for whether a resignation is voluntary is an objective test. The resignation must objectively reflect an intention to resign or conduct which establishes this intention, the arbitrator said.
“There must be evidence that the employee clearly, unequivocally and voluntarily resigned,” the arbitrator said. “Similarly, (if it is involuntary) it must also be established that the employee was the subject of such duress or coercion that the resignation was truly not voluntary.”
In the Dingwall case, the arbitrator said there was no doubt the resignation was of the involuntary nature.
“None of the persons he was dealing with could have reasonably or objectively believed he was acting of his own free will,” the arbitrator said. “He advised them that he felt compelled to resign. No one disagreed with this motivation or the necessity of leaving. Indeed, by failing to take the steps available to it in response to very serious allegations of wrongdoing, Canada magnified the duress to which Dingwall was subjected.
“There was no apparent interest in determining whether the allegations had a basis in fact before he was required to decide anything and, indeed, at least one cabinet minister subsequently and publicly spoke against him. The resignation was manifestly involuntary.”
But when all the talk of former PMs and MPs is stripped away, what’s left is a very relevant lesson for employers. Dingwall’s case boils down to one of constructive dismissal.
George Adams, the arbitrator in this case, began by posing two questions: Was Dingwall’s resignation voluntary or involuntary? And, if the resignation was involuntary, what was Dingwall owed in terms of compensation and damages?
Dingwall’s decline
Dingwall was appointed to his position with the Royal Canadian Mint on April 1, 2003, for a five-year term. Before that, since 1997, he had conducted a government relations and strategy consulting practice. Prior to that, he had been a member of parliament from 1980.
While an MP, Dingwall served in a number of cabinet positions including Minister of Health and Minister of Public Works and Government Services. It’s no secret that Dingwall was close to Chrétien and that when Paul Martin took over that closeness became a bit of a liability. In fact, by the time Dingwall resigned from the Mint, he was the last remaining Chrétien cabinet minister appointee to public office.
Dingwall a top-notch CEO
When Dingwall took over the Mint in 2003, it was a money-losing proposition. There were serious labour relations problems and the Canada Revenue Agency (CRA) was conducting five audits.
He led a restructuring of the organization, encouraged and supported the resolution of its labour relations and CRA problems and the Mint achieved a pre-tax profit of $15.9 million in 2004.
“His leadership provided the opportunity for a positive change in the Mint’s culture that was well received by the Mint’s board, its management and its staff,” said the arbitrator. “During Dingwall’s tenure, the business grew by over $105 million and increased employment opportunities in Winnipeg and Ottawa by almost 200 people.”
As a result of his high performance, Dingwall enjoyed substantial performance awards. The board of directors approved a salary increase to $253,200 in 2004 and a performance award of $37,980. He expected to enjoy comparable increases and performance awards during the balance of his five-year term, which was to end in April 2008.
Problems begin to surface
Trouble started brewing in the fall or 2005. While Dingwall was away on business in Indonesia, he was told of government concern about media coverage of his lobbying activities. The media reports were wrong and Dingwall assured the government there was nothing improper about his earlier activities as a consultant.
Shortly after that, opposition MPs in the House of Commons made serious allegations about his expenses as president and CEO of the Mint. The allegations, which the arbitrator called unsubstantiated, made headlines across the country.
“Effectively, all of the expenses of Dingwall’s office ($730,000 approximately) involving several other employees were being attributed to him,” the arbitrator said. “In fact, well over 70 per cent of these approved expenditures related to the other employees and two subsequent independent reviews (subsequent to Dingwall’s departure) confirmed the propriety of the expenditures and the governance mechanisms in place to approve and monitor such expenses.”
The timing of the attack was particularly problematic for the government because of an impending election. On Sept. 27, 2005, Dingwall received a call from the minister responsible for the Mint berating him for having to deal with an expense-related issue at such a delicate time.
Dingwall, an experienced politician, understood what was happening and realized there would be no support from the government regardless of the complete absence of wrongdoing on his part. He had become a political hot potato that it wanted no part of this close to an election.
“It was apparent that he would be sacrificed (he said ‘a bullet was coming’) and then he would spend years in court trying to clear his name and seeking fair compensation for an unjust termination,” the arbitrator said. “Dingwall realized he had no choice but to make the best arrangement to leave that he could.”
On Sept. 28, the details of a mutually acceptable departure package were worked out. Dingwall then called Prime Minister Martin and told him he “felt compelled to step down” and why. Martin did not disagree with Dingwall’s assessment or encourage him to stay on.
The paperwork was taken care of and an announcement about Dingwall’s resignation was put out before question period in the House of Commons on Sept. 28.
Government balks at severance
But things again took a turn for the worse, from Dingwall’s point of view. Suddenly, the government decided not to honour the severance pay that had been agreed upon.
The announcement that was put out on Sept. 28 concerning his resignation was intended by him to minimize any possible embarrassment to the government, something not uncommon in the case of the departure of senior executives in both the private and public sector.
Dingwall said he suffered personally and professionally because of the government’s decision not to publicly acknowledge its role in his departure and its involuntary character. He has not received any income from employment since his departure or any money under his MP’s pension or his pension from the Mint. And he was not given professional job placement assistance in his search for other work as would be usual in the case of the termination of a senior executive.
Resignation forced
The arbitrator said there was no doubt the resignation was “clearly involuntary.” Dingwall was not planning to leave the Mint in the fall of 2005.
“There was no basis to the criticisms leveled against him but no one in the government was prepared to listen to him or inquire fairly,” the arbitrator said. “Several former Chrétien cabinet ministers had lost their jobs and were involved in very public (and expensive) litigation. No one disagreed with his assessment that he was next. No one suggested that he would be defended or that the allegations would be the subject matter of a rational resolution process before he was required to do anything. Instead, he was offered terms agreeable to him in the circumstances if he was prepared to go co-operatively and quickly. He was encouraged to announce his departure before question period on the very day he had decided to depart – a time that preceded the formal approval of the terms that had been negotiated with him and on which he had relied in submitting his resignation.”
The arbitrator said the fact that politics is a “blood sport” might explain the government’s subsequent conduct in refusing to approve his severance, but it was not justifiable. Dingwall had performed his job well. He was entitled to the government’s rational support when serious charges concerning his expenses were made against him. If the government was unwilling to provide that support, for whatever reason, then it had an obligation to end the employment on equitable terms.
Dingwall awarded $417,000
The arbitrator awarded Dingwall 18 months’ salary ($379,800) and 10 per cent of that amount ($37,980) in lieu of benefits for a lump-sum total of $417,780. It also awarded him an annual allowance of $42,010 and ordered the government to pay Dingwall’s legal costs on a total indemnity basis.
The voluntary resignation test
The test for whether a resignation is voluntary is an objective test. The resignation must objectively reflect an intention to resign or conduct which establishes this intention, the arbitrator said.
“There must be evidence that the employee clearly, unequivocally and voluntarily resigned,” the arbitrator said. “Similarly, (if it is involuntary) it must also be established that the employee was the subject of such duress or coercion that the resignation was truly not voluntary.”
In the Dingwall case, the arbitrator said there was no doubt the resignation was of the involuntary nature.
“None of the persons he was dealing with could have reasonably or objectively believed he was acting of his own free will,” the arbitrator said. “He advised them that he felt compelled to resign. No one disagreed with this motivation or the necessity of leaving. Indeed, by failing to take the steps available to it in response to very serious allegations of wrongdoing, Canada magnified the duress to which Dingwall was subjected.
“There was no apparent interest in determining whether the allegations had a basis in fact before he was required to decide anything and, indeed, at least one cabinet minister subsequently and publicly spoke against him. The resignation was manifestly involuntary.”
