Canadian Employment Law Today

January 29, 2020

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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How would you handle this case? Read the facts and see if the judge agrees YOU MAKE THE CALL ©2020 HAB Press Limited, a subsidiary of Key Media KEY MEDIA and the KEY MEDIA logo are trademarks of Key Media IP Limited, and used under license by HAB Press Limited. CANADIAN EMPLOYMENT LAW TODAY is a trademark of HAB Press Limited. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photo - copying, recording or otherwise, without the prior written permission of the publisher. The publisher is not engaged in rendering legal, accounting or other professional advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The analysis contained herein represents the opinion of the authors and should in no way be construed as being either official or unofficial policy of any governmental body. GST/HST#: 70318 4911 RT0001 Emplo y ment Law Today Canadian www.employmentlawtoday.com Published biweekly 22 times a year Subscription rate: $299 per year CUSTOMER SERVICE info@keymedia.com www.employmentlawtoday.com 20 Duncan St. 3rd Floor, Toronto, ON M5H 3G8 President: Tim Duce Editor: Jeffrey R. Smith Email: jeffrey.smith@keymedia.com Copy Editor: Patricia Cancilla Business Development Manager: Fred Crossley Email: fred.crossley@keymedia.com Phone: (416) 644-8740 x 236 Marketing Co-ordinator: Keith Fulford Email: keith.fulford@keymedia.com Phone: (416) 649-9585 HAB Press Ltd. Worker considers new pay plan unenforceable THIS EDITION of You Make the Call in- volves 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 direc- tor 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 em- ployees, 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 pre- owned sides of the business and began operating them at separate locations. Van Dyke was assigned to the new location de- voted exclusively to pre-owned vehicles, with his title changing to director of pre- owned 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. e 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 ve- hicles 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 com- pensation 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 own- er told Van Dyke that he wanted to reduce Van Dyke's shareholdings back to three per cent and cut his pay in half. e 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 employ- ment contract. Emplo y ment Law Today Canadian www.employmentlawtoday.com 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 en- forceable, you're correct. e court found that the 2016 pay plan wasn't an amend- ment 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. e evidence showed Van Dyke's remuneration had been revised periodically as part of his employment contract, said the court. e court noted that the 2016 pay plan was different in that it was the first one to de- liberately 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 en- title 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 con- tractual norm." BJAI was ordered to pay damages equiva- lent 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.).

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