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Sale of a Business is Not Constructive Dismissal

In the decision 2108805 Ontario Inc. v. Boulad[1] rendered on January 25, 2016, the Quebec Court of Appeal overruled the trial judge who had considered that the change of employer resulting from a change of ownership constituted a unilateral and substantial modification of Mr. Boulad’s essential terms and conditions of employment and therefore awarded him an indemnity in lieu of notice of termination of employment equivalent to 24 months of salary and benefits.

Mr. Boulad was director of a hotel owned by the Westmount Hospitality Group (“Westmount“) an important international hotel group. Westmount sold the hotel for which Mr. Boulad was responsible to Jesta, a much smaller hotel group.  Pursuant to the transaction and to section 2097 of the Civil Code of Quebec (“CCQ“), Jesta undertook to continue Mr. Boulad’s employment under the same terms and conditions of employment.  Mr. Boulad refused to pursue employment with Jesta and asked Westmount to relocate him at another hotel or pay him a severance package.  Westmount denied Mr. Boulad’s request as it considered his employment was being continued with Jesta pursuant to section 2097 CCQ.  Mr. Boulad sued Westmount claiming that the change of employer amounted to a constructive dismissal, namely considering the loss of prestige associated with his employment with an important hotel group and the loss of transfer and promotion opportunities at the international level.

In its decision, the Court of Appeal confirmed the imperative and declaratory nature of section 2097 CCQ which stipulates that the employment contract continues to be in force and binding following the alienation of an enterprise.

The change of employer shall not be considered a substantial modification of the essential terms and conditions of employment for the sole reason that the new employer becomes the debtor of the previous employer’s obligations. The Court of Appeal also acknowledged that a business is not static and may evolve through time.  The workplace atmosphere and environment, as well as transfer and promotion opportunities are generally not part of the terms and conditions of employment unless expressly stipulated in the employment contract. In this particular case, the evidence fell short from demonstrating that Westmount and Mr. Boulad had agreed to such considerations being part of the terms and conditions of employment.  Both Westmount and Jesta abided by their legal obligations pursuant to section 2097 CCQ and Mr. Boulad could not legally or contractually require Westmount to relocate him or pay him severance. Mr. Boulad’s refusal to work for Jesta therefore constituted a voluntary resignation.

Accordingly, an employee who does not wish to continue employment with a successor employer may resign from employment but will have no recourse against the vendor or the purchaser, subject to specific undertakings in the employment agreement.

[1] 2016 QCCA 75.

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Sale of a Business is Not Constructive Dismissal

Fixed Term Contracts: Damages for “trouble and inconvenience”

In a recent decision[1], the Superior Court of Quebec held that the termination of a fixed term contract of employment constitutes a breach of contract which may allow for an award of damages for “troubles and inconveniences” suffered by the employee, in addition to damages for early termination.

The Plaintiff had been terminated without cause 15 months before the expiry of the term of his employment contract. The Court concluded that the unilateral termination of the Plaintiff’s fixed term contract was illegal and ordered the Employer to pay the Plaintiff an indemnity equivalent to the wages he should have received until the end of the contract.

The main interest of this case is the Plaintiff’s claim for $50,000 as damages for “troubles and inconveniences”, which required the Court to consider whether such damages could be compensated in the context of a fixed term contract of employment.

In its analysis, the Court first establishes that, while the termination of the Plaintiff was not based on serious grounds, it was not made in an abusive or humiliating fashion. However, the judge accepted that it had nonetheless caused severe stress and anxiety to the Plaintiff, as is almost always the case when a person is terminated.

The Court noted that according to a well-established jurisprudence[2], in the case of an indeterminate term contract, its unilateral termination by the employer is not, in itself, a civil fault, even if it prejudices the employee. Consequently, except when the termination is made in an abusive way, the compensation for troubles and inconveniences is not available to the employee. This rationale is grounded in the principle that either party to an indeterminate term contract of employment may terminate it by giving notice of its termination to the other party, as recognized under Section 2091 of the Civil Code of Quebec.

However, a fixed term contract is binding on the parties until its expiry and may only be unilaterally resiliated for a serious reason. Thus, the employer who, without a serious reason, resiliates the fixed term contract of an employee does not exercise a right, but rather breaches one of its contractual duties. If the evidence shows that this breach of contract caused troubles and inconveniences, such as stress or anxiety, the terminated employee could be compensated for these damages. In this matter, the Court awarded the Plaintiff $5,000 for troubles and inconveniences.

Thus, according to this decision, a distinction must be made between the unilateral resiliation of indeterminate and fixed term contracts with regards to the award of damages for non-pecuniary loss.

[1] Bouasse v. Gemme canadienne PA inc., 2016 QCCS 1263.

[2] 1994 CanLII 5837 (QC CA).

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Fixed Term Contracts: Damages for “trouble and inconvenience”

La Cour supérieure du Québec octroie plus d’un million de dollars à un employé victime de congédiement déguisé

Chalifour c. IBM Canada ltée, 2011 QCCS 5777, (DTE 2011-47)

Il s’agit d’un des montants les plus élevés jamais octroyé par les tribunaux québécois en matière de congédiement déguisé.

Dans ce jugement de la Cour supérieure du Québec rendu le 3 novembre 2011 par la Juge Sylviane Borenstein, la Cour octroie au demandeur, Denis Chalifour, lequel occupait un poste de directeur en chef chez IBM, la somme de 300 000 $ à titre de dommages et intérêts punitifs, en sus d’une indemnité de délai congé de plus de 786 767,31 $ équivalant à 24 mois de salaire( incluant la somme de 35 000 $ à titre de dommages et intérêts pour avoir été congédié de façon humiliante et dégradante).

M. Chalifour comptait plus de 11 années de service chez IBM et occupait le poste de directeur en chef depuis 2004. À ce titre, il était responsable de superviser entre 100 et 250 personnes dont une équipe de 15 directeurs exécutifs et administrait un portefeuille de revenus de plus de 400 millions de dollars par année lequel incluait d’importants clients d’IBM.

M. Chalifour alléguait qu’en 2006, IBM avait, de façon unilatérale, fondamentalement modifié les termes de son contrat d’emploi, le poussant ainsi à démissionner.

En effet, à l’automne 2006, M. Chalifour s’est absenté du travail à plusieurs reprises afin de recevoir des traitements en vue de lutter contre un cancer de la vessie. En décembre 2006, sa supérieure immédiate lui a fait part de son intention de le muter à un autre poste.

Dans cet autre poste, essentiellement administratif, sans portefeuille à gérer, seulement deux personnes auraient été placées sous sa responsabilité. De plus, IBM refusait de lui révéler le détail de la rémunération avant qu’il ait accepté ce nouveau poste. La Cour a retenu que le salaire du poste proposé aurait été substantiellement inférieur à celui que M. Chalifour recevait alors qu’il occupait le poste de directeur en chef. Les parties ont tenté de régler le dossier à l’amiable, sans succès.

La Cour a conclu qu’en insistant pour que M. Chalifour occupe ce poste, IBM l’avait effectivement congédié de façon déguisée.

Quant à l’octroi de dommages et intérêts punitifs, la Cour a retenu que IBM a agi intentionnellement et de façon humiliante et dégradante à l’égard de M. Chalifour, en considérant qu’il n’était plus apte à remplir ses fonction et ce, sans aucune preuve médicale.

L’importance de l’effet dissuasif de l’octroi de dommages et intérêts punitifs, ainsi que la capacité de payer de la partie condamnée, ont été les critères que la Cour a évalués afin de déterminer le montant à verser de 300 000 $.

À cet effet, la Cour a considéré l’importance du chiffre d’affaires annuel généré par IBM, lequel s’élève à près de deux milliards de dollars. Il s’agit jusqu’à présent d’un des montants les plus élevés jamais octroyé à titre de dommages et intérêts punitifs par les tribunaux québécois.

IBM a porté ce dossier en appel le 2 décembre dernier.

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La Cour supérieure du Québec octroie plus d’un million de dollars à un employé victime de congédiement déguisé