Hardball negotiations don’t disguise wrongful dismissal

Cain v. Clarica Life Insurance Co., 2004 CarswellAlta 966, 2004 ABQB 531 (Alta. Q.B.)

Edward Cain started working for Metropolitan Life Insurance Company in April 1970 and continued working as a branch manager when it was taken over by a company which later went under the name Clarica Life Insurance Co.

He worked for Clarica until May 2000, when he was given a lump-sum severance payment of $88,266. Cain argued the compensation he received, which amounted to nine months’ salary, was too little in light of his 30 years’ service. He sought 30 months’ salary and filed an action for the balance.

In May 1998, as part of the corporate takeover, Cain signed cancellation agreements with the old company. He also signed corresponding new agreements with the new company. All of these were effective May 1, 1998, when Cain became the branch manager in Edmonton. He remained in that position until told he would no longer be a branch manager with Clarica, at which point he negotiated the lump-sum severance payment and left the company.

Clarica argued the agreements Cain signed when the company acquired Metropolitan Life contain termination provisions which are a complete answer to Cain’s claims. The company also argued the lump-sum payment and other benefits negotiated and accepted by Cain are all he is entitled to.

The Alberta Court of Queen's Bench rejected this argument. A purchaser of an operating business has certain obligations to those employed there. It is implied the terms of employment will remain the same unless it is specifically brought to the attention of employees there has been a fundamental change, and the employee has to have a real opportunity to assess the changes.

“In this case that never happened… there was clearly never a meeting of the minds in relation to the termination powers of the employer,” ruled the court. That there was no meeting of the minds is enough to overturn the “sanctity of the signed contract,” it held.

The court said Clarica was dissatisfied with Cain's performance and that, by offering him a lower position at a branch office, it was demoting him. That amounted to constructive dismissal, it ruled. The court chastised Clarica for not recognizing Cain’s 30 years of service in negotiating the severance package.

“Clarica took advantage of the vulnerability of Mr. Cain… they opened negotiations with him in relation to the appropriate notice well below the standard he was entitled to… the employer went beyond playing hardball in its negotiations,” the court ruled.

There was no good faith or fair dealings and therefore the termination settlement reached could not stand, the court held. It determined Cain was entitled to 22 months’ salary in lieu of notice, nine of which had already been paid and three more had been given him by Clarica so his pension plan could fully vest. Cain was awarded 10 months’ salary, $98,074 plus interest, on top of the $88,000 he had already been paid.

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