A big factor in driving up the notice period in Rodgers v. CEVA was the fact Bruce Rodgers had to buy company shares when he was first hired. Ontario Superior Court judge Gerald E. Taylor said this signaled to the employee there would be a long-term employment relationship. To make matters worse, the shares would ultimately have no value.
In 2009, Rodgers accepted a job with CEVA Freight Canada Corp. as its country manager at an annual salary of $276,000 with a $40,000 signing bonus paid within the first week of employment. He was responsible for more than 500 employees and the Canadian operation generated sales in excess of $140 million annually.
On June 28, 2012, his employment with the company was terminated and the company paid him two weeks salary in lieu of notice — $11,115.44, severance pay in the amount of $5,307.72 and outstanding vacation pay of $20,324.92.
When he was hired, Rodgers was told by the CEO of the global parent company that it was a requirement for all senior managers to have an investment in the company. Rodgers borrowed $102,000 in order to make the required investment.
“One of the documents given to the plaintiff was entitled ‘CEVA Investments Limited 2006 Long-Term Incentive Plan,’” Taylor said in the decision. “I find that the required investment in CEVA Investments was intended to create the impression in the mind of the plaintiff that by accepting employment with the defendant he would have a degree of job security beyond what would normally be anticipated.”
The requirement for senior level hires to buy shares is not uncommon, says Hendrik Nieuwland, a partner with Shields O’Donnell MacKillop LLP, however for it to be used in a determination of damages is unusual.
“I’ve never seen the analysis before of having to buy shares driving up the notice period. This ruling may have an impact on the practice going forward,” he says. “He should have got something in the range of nine to 10 months, but because of the share issue it was pushed up substantially.”
The judged cited a number of cases, including Love v. Acuity Investment Management Inc. in which a 55-year old senior vice president making $630,000 with 2.5 years of service received five months notice at trial, and on appeal he received nine months.
“That was huge, for a person at that level of service, age and making that level of income,” says Nieuwland who acted for Love. “I don’t think it’s a coincidence when you look at the Love case where they received nine months and this case which is five months higher and the value of the shares was about five months of compensation. That’s what drove this decision.”
Nieuwland doesn’t think Rodgers should push employers away from the share purchase practice because having “skin in the game” is important for senior level hires.
“The real take-home message is the employer was sunk because they didn’t have a proper termination clause in the contract. The termination clause basically said they would provide common law notice which is subject to the Bardal factors which aren’t closed.”
The judge said the plaintiff’s age, his position as the Canadian manager of CEVA’s operations responsible for more than 500 employees and sales in excess of $140 million annually, the limited number of similar positions in Canada, and the requirement that he make a significant investment with the company all point to a lengthy notice period.
“. . . I have concluded that both parties to the employment contract contemplated, at the commencement of the employment relationship, that it would be a long one. Specifically, I do not believe that either party thought of the plaintiff’s employment could be terminated after approximately three years of service upon payment of two weeks’ salary in lieu of notice plus severance pay in the approximate amount of $5,000. . . . In my view, an appropriate period of notice is 14 months.”
Taylor ultimately determined Rodgers damages at $345,985.
Update 2:58 p.m.: Error in quote corrected and Acuity changed to Love.