June 11, 2009
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The oppression remedy has been described as one of the broadest remedies available to a complainant, since it empowers courts to make any order necessary to rectify the conduct complained of.

The remedy has been consistently used to rectify oppressive conduct, which the Supreme Court of Canada recently described as conduct that is "burdensome, harsh and wrongful" and "a visible departure from standards of fair dealing" (BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560). It is available where an officer, director or corporation has engaged in oppressive conduct that violates the reasonable expectations of the parties, typically shareholders (Naneff v. Con-Crete Holdings Ltd., [1995] O.J. No. 1377).

But the courts have been traditionally reluctant to award an oppression remedy for the wrongful dismissal of employees, even where the employees in questions were also shareholders (see Mohan v. Philmar Lumber (Markham) Ltd., [1991] O.J. No. 3451 and Flatley v. Algy Corp., [2000] O.J. No. 3787).

However, a recent decision of the Divisional Court, 2082825 Ontario Inc. v. Platinum Wood Finishing Inc., [2009] O.J. No. 1318, upheld a trial judge's decision that combined a wrongful dismissal claim with an oppression remedy application. This decision demonstrates that oppression claims in employment cases are possible where wrongful dismissal and oppressive conduct are indivisible. Given the broad discretionary nature of the oppression remedy, combining oppression claims in the right circumstances with dismissal claims is a creative avenue for counsel to explore.

Platinum Wood involved an acquisition in 2005 by the appellants, the Herwynen brothers, who owned 70 percent of the shares and the respondent employee, Barbieri, who owned 30 percent. In return for Barbieri paying a premium for his shares and obtaining only a minority interest in the company (he had wanted a 50 percent interest), it was agreed that Barbieri would be a director, president and manager of the company.

The parties entered into a letter of agreement setting out those terms and the letter was to form the basis of a unanimous shareholder agreement. Barbieri had the full day-to-day management of the company.

Barbieri successfully managed the company until March of 2008, when he was hospitalized and ultimately diagnosed with leukemia. At that time, one of the appellants visited him in the hospital to advise Barbieri that his salary would be terminated. Two days after Barbieri's return to work in June 2008, he was removed as director and president. Eight days later, he was terminated.

Barbieri was offered six months notice in return for signing a release. Barbieri refused the offer and started an application for oppression. As part of his application, he asked that the issue of damages for wrongful dismissal  be referred to trial, asserting that removing him as president and director and terminating him were oppressive.

The application judge concluded that the appellants had acted in an oppressive manner by stopping Barbieri's salary, wrongfully removing him from management and ordering a corporation they personally controlled to delay its paments to Platinum. As a result, the appellants were ordered to purchase Barbieri's shares. The judge also ordered a trial to assess Barbieri's wrongful dismissal damages.

On appeal, the respondents argued that their actions were protected by the "business judgement rule" and that wrongful dismissal claims must be separate from oppression claims. The Divisional Court found that while deference should be accorded to business decisions, the business judgement rule does not apply when these decisions violate express agreements between shareholders regarding business matters. As such, the rule could not shield oppressive conduct contrary to the reasonable expectations of the shareholders as set out in the letter of agreement.

As for the wrongful dismissal, the Divisional Court agreed, generally, that wrongful dismissal is not to be intermingled with an oppression claim. However, a wrongful dismissal is appropriate in the context of oppression where there is "an intimate connection between the employment contract and the shareholders agreement."

If the interests of an employee are found to be integrally intermingled with his or her interests as shareholder or director and the dismissal is part of the pattern of oppressive conduct, the claims can co-exist. In this case, because Barbieri's management position was inextricably linked to his agreement to acquire a minority interest, it was appropriate to conclude that Barbieri's termination was oppressive.

The decision demonstrates that the courts will allow oppression and dismissal claims to proceed together in circumstances where the claims are indivisible. This potentially grants further remedies to dismissed employees who are also shareholders or directors of a corporation. Broader remedies, such as requiring a corporation topurchase their shares and even to undo oppressive transactions, could be available.

Piercing the corporate veil with personal remedies against defendant shareholders or directors is possible if the directors or shareholders personally benefited from their oppressive conduct. Unlike claims for Wallace damages, the courts have found that it is not necessary to demonstrate bad faith to be awarded a remedy for oppression.

Consequently, counsel considering claims for dismissed employees where employment was intermingled with corporate interests will need to review the terms of any existing shareholder agreements and determine whether any reasonable expectations were breached. Equally, employers will need to consider the consequences of these agreements when terminating the employment of  shareholders and directors, since the courts will hold the parties to the bargain and the reasonable expectations that the parties agreed to.

Steve Levitt practises employment law with Nelligan O'Brien Payne LLP LLP, a full service law firm in Ottawa.

[This article is reprinted with permission and first appeared in the November 2009 issue of The Lawyers Weekly.]

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law