You make the call
This edition of You Make the Call involves a long-time employee who wanted his pay in lieu of notice based on an old pay plan rather than a new one that reduced his income and was implemented a few months before his dismissal.
Brian Jessel Autosport (BJAI) operates an automobile dealership in Vancouver selling new and pre-owned vehicles. BJAI hired Tim Van Dyke in 1982 as a lot attendant, but over several years, he moved into other positions, reaching the position of director of new and pre-owned operations in 2007. By then, the owner of BJAI divided a 10-per-cent equity interest in the business among Van Dyke and two other senior employees, with each receiving 3.33 per cent. Van Dyke’s shares eventually increased to 10 per cent.
BJAI instituted a pay plan for Van Dyke in 2012 that included a monthly base salary, bonuses based on the profits earned from both new and pre-owned vehicle sales and dividends from his shares. Previously, his pay plan had been amended in 2010, 2009, 2007 and 2005.
In 2015, BJAI divided the new and preowned sides of the business and began operating them at separate locations. Van Dyke was assigned to the new location devoted exclusively to pre-owned vehicles, with his title changing to director of preowned operations. However, he continued to support new vehicle sales staff through appraisals of pre-owned vehicle trade-ins.
Soon after, Van Dyke developed a plan to buy trucks locally for export to the U.S. However, the new CEO who had taken over for the owner was concerned over the company’s exposure to liability and asked Van Dyke to sign a personal guarantee for $795,000 to cover it. The venture went as planned and there was no loss to Van Dyke or BJAI.
In early 2016, the CEO decided to change Van Dyke’s pay plan. Although Van Dyke was responsible only for the pre-owned vehicles part of the business, his 2012 pay plan was still in place that reflected both sides of the business. As a result, Van Dyke’s compensation in 2015 had been higher than normal, making him the second-highest paid employee after the CEO.
A new pay plan was drafted that excluded the new vehicle part of the bonus formula and replaced it with a new bonus equal to one per cent of the profit from the entire business, effective April 1, 2016. Van Dyke signed the new pay plan one month later.
A couple of months later, the BJAI’s owner told Van Dyke that he wanted to reduce Van Dyke’s shareholdings back to three per cent and cut his pay in half. The following month, on Aug. 16, BJAI terminated Van Dyke’s employment. He was 52 at the time and had worked for BJAI for 34 years.
Van Dyke sued for wrongful dismissal, claiming 24 months’ pay in lieu of notice to be calculated under his 2012 pay plan, which entitled him to more than $61,000 more than what he received between the implementation of the new pay plan on April 1 and his dismissal, plus a difference of more than $400,000 during the notice period. He argued that the new 2016 pay plan wasn’t valid because he didn’t receive consideration for the change in his employment contract.
YOU MAKE THE CALL
Was the new pay plan enforceable?
OR
Was Van Dyke entitled to damages calculated under the 2012 pay plan?
IF YOU SAID the new pay plan was enforceable, you’re correct. The court found that the 2016 pay plan wasn’t an amendment to the employment contract but rather “the latest in a long serious of such revisions.” Van Dyke’s pay plan had been revised before — the previous pay plan had been in effect since 2012, but Van Dyke had been in the position since 2007. The evidence showed Van Dyke’s remuneration had been revised periodically as part of his employment contract, said the court.
The court noted that the 2016 pay plan was different in that it was the first one to deliberately reduce his overall remuneration. However, Van Dyke’s income in 2015 had been greater than normal because his bonus was tied to both sides of the business, which prompted the new plan to bring it back in line with that of previous years. In addition, Van Dyke’s employment contract didn’t entitle him to retain the 2012 plan any more than it did the previous plans, the court said.
“I find that it was not inconsistent with the terms of Mr. Van Dyke’s employment contract for [the CEO] to restore Mr. Van Dyke’s remuneration to historical levels as and when he did,” said the court. “In this case, it is Mr. Van Dyke who seeks to rely on one anomalous year, rather than several representative ones, to establish the contractual norm.”
BJAI was ordered to pay damages equivalent to 24 months’ pay under the new pay plan implemented on April 1, 2016.
For more information, see:
• Van Dyke v. Brian Jessel Autosport Inc., 2019 BCSC 1736 (B.C. S.C.).
