A recent decision of the Alberta Court of Queen’s Bench has defied expectations that damages stemming from the manner of an employee’s dismissal would be rare following last year’s seminal decision of the Supreme Court of Canada in Honda v. Keyes.
The plaintiff was a 34 year old financial advisor, recognized as one of the employer’s top performers, with a book of business in the range of $150 million. He was terminated for cause in 2001. After his termination, only $10 million of his book of business followed him. He sued for wrongful dismissal and the loss of his book of business.
At trial, the employer was unable to establish cause. The plaintiff was awarded damages of $2.2 million, plus interest and costs. The award included:
- forgiveness of the balance of a forgivable loan which he had been provided upon commencing employment;
- 12 months’ compensation in lieu of notice, amounting to $600,000; and
- $1.6 million for the manner in which the employer terminated his employment and to compensate for his inability to maintain his book of business.
Regarding the manner of termination, the Court concluded that both the employee and the employer had contemplated he would suffer damages in excess of lost income if his employment was terminated without notice. A financial advisor’s reputation is critical in order to maintain his book of business. Clients would be concerned and suspicious about the sudden departure of a financial adviser without prior notification that he would be moving to a new brokerage house.
The employer provided no acceptable explanation for why it could not have provided the employee with some minimal notice of dismissal (or allowed him to resign) so that he could have taken steps to preserve his reputation. Once it reached a decision to terminate his employment, the employer waited nearly two weeks to do so, leading the Court to conclude that any concerns about his honesty were hollow.
For employers, this is a cautionary tale: the decision to terminate any employee dependant on a “book of business” must be treated carefully. Absent cause, employers may be required to provide notice of the pending termination to the employee to mitigate against substantial claims like those advanced in this case.
(Click here for copy of Decision)