In a recent decision, the Honourable Mr. Justice Verhoeven of the Supreme Court of British Columbia considered the sufficiency of an employer’s notice of termination of employment within the context of a takeover. In Kerfoot v. Weyerhaeuser Company Limited, 2012 BCSC 640, the Court was asked to award damages for wrongful dismissal to two employees – primarily damages related to a loss of their pensions. The plaintiffs were successful and received awards of approximately $10,000 and $80,000. In addition, there are several other potential plaintiffs in a similar position to the plaintiffs in the Kerfoot action.
On March 7, 2007, Weyerhaeuser transferred its interest in a pulp mill to Domtar Corporation. As a result of the transaction, all of the workers at the mill had their employment terminated. The Court stated that almost all of the workers, including the plaintiffs, immediately obtained new employment with Domtar – in the same position and with the same or similar wages.
The plaintiffs did not claim any income loss – only damages for loss of pension and savings benefits that they would have received during a period of reasonable notice of termination of their employment.
Weyerhaeuser argued that it had provided reasonable notice when it informed its employees of the Domtar transaction, approximately 6.5 months prior to March 7.
The primary issue at trial was whether or not the notice that Weyerhaeuser alleged it provided was specific, unequivocal and clearly communicated. The Court noted, among others, the following facts:
a) Weyerhaeuser announced its intention to enter into a transaction which would result in the Kamloops pulp mill being transferred to a new corporate entity.
b) Employees were advised that the transaction would take approximately six months to complete.
c) A “Question and Answer” document distributed simultaneously provided some details about the intended transaction. Details included were that the transaction was expected to close in the first quarter of 2007, and that it was subject to “regulatory approvals and the approval of Domtar shareholders”. The document also said that “Virtually everyone will be offered a job.”
d) Weyerhaeuser set up a website where employees could post questions concerning how the transaction would affect them.
e) On November 21, 2006, the employees were told that there had been a favourable U.S. anti-trust ruling.
f) On January 9, 2007, the employees were sent a memo that said “progress towards closing the Weyerhaeuser-Domtar transaction is off to a good start in 2007”.
g) Another memo said “We remain on target to close the transaction in the first quarter of 2007”.
h) On January 24, 2007, the employees were sent a copy of a press release from Weyerhaeuser and Domtar Inc. announcing the names of the board of directors for the “new Domtar”, which by then was identified as “Domtar Corporation”.
i) On February 12, 2007, a press release announced approval of the transaction by authorities under the Investment Canada Act, R.S.C., 1985, c. 28 (1st Supp.), and provided the names of the executives for the new company.
The Court concluded that:
On all of the evidence, it is clear that the employees, including the plaintiffs, were never sure that their employment with Weyerhaeuser would be terminated until it actually occurred, coincident with being informed of the completion of the transaction, on March 7, 2007. Prior to that, as the evidence makes abundantly clear, the employees were told that the transaction was subject to numerous pre-conditions. The employees would have understood that their employment with Weyerhaeuser would terminate only if and when the transaction completed. Mr. Kerfoot and Mr. Harshenin [the plaintiffs] both testified that they indeed had this understanding based upon all of the communications they had received.
The Court concluded that the plaintiffs were each entitled to one month of reasonable notice per year of service. The Court rejected an argument by Weyerhaeuser that the amount of notice should be reduced because of the seamless transition of the plaintiffs’ employment to Domtar.
Weyerhaeuser also argued that the global compensation earned by the plaintiffs at Domtar exceeded any recoverable losses and as such the plaintiffs had fully mitigated their damages. The Court agreed that all of the compensation earned by the plaintiffs should be taken into account and then reviewed the pension plans and the savings plan, and the options chosen by the plaintiffs in regards to the plans, upon the sale of the mill to Domtar. The Court set-off amounts earned as salary increases (which were paid in lump-sum form) and then made an award to each of the plaintiffs in respect of three separate plans – based on what they would have been entitled to had unequivocal reasonable notice been provided to them.
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