CITATION: O’Reilly v. Imax Corporation, 2019 ONSC 342

                                                                                                  COURT FILE NO.: CV-16-561057

DATE: 20190125

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:	) )
LARRY O’REILLY   Plaintiff   – and –   IMAX CORPORATION Defendant	) )) )) )) ))))))	M. Catherine Osborne & Justin Tetreault, for the Plaintiff
		Trevor Lawson, for the Defendant
	)
	)
	)	HEARD: January 11, 2019

 

M. D. FAIETA j.

reasons for decision

 

INTRODUCTION

 

•        compensation for unpaid commissions on sales made prior to July 8, 2016, being the date of  termination;

•        30 months’ reasonable notice of termination;

•        damages of unpaid base salary over the reasonable notice period;

•        damages for the lost opportunity to earn commissions over the reasonable notice period;

•        damages for the lost value of various stock option grants that would have vested during the reasonable notice period;

•        damages for pension contributions during the reasonable notice period; and

•        damages for the value of his lost benefits over the last 24 months of the reasonable notice period in the amount of: 1) $886.23 per month for an employee benefit plan; 2) $750 per month for a car allowance; 3) $5,000.00 USD per year for an executive wellness expense account; and 4) $500.00 USD per year for a fitness expense account.

BACKGROUND

January 2001 - VP & GM, Film Distribution and Theatre Sales (Americas and Europe);

January 2003 – January 2005: SVP, Theatre Development and Film Distribution (World Wide) – led a team of 40 professionals responsible for Film Distribution, Theatre Sales, Theatre Design, Project Management and Corporate Events;

September 2005 – January 2015 – President, World Wide Sales.  Led a team of 33 professionals responsible for Theatre Sales, Theatre Design, Project Management and Corporate Events; and

January 2015 – January 2016: President, Strategic Sales.  Reporting to the President, IMAX Theatres and the CEO, TCL IMAX Joint Venture (China), with four primary areas of responsibility: Commercial Sales; Americas, Museum Sales: World Wide, Sales Strategy & Planning: Worldwide and Acting President, Sales and Marketing for TCL IMAX Joint Venture in Shanghai.

Further to our recent discussions, I am writing to confirm the details of our agreement with respect to your new areas of focus and related commission opportunities in your ongoing role of President, Worldwide Sales, continuing to report to me.

1.      Your principal focus and commission opportunities will be as follows:

a.      The sale of Institutional theatre systems worldwide – for these sales, you will be entitled to earn $15,000 per system.

b.      IMAX Private Theatre (IPT) sales worldwide – for these sales, we will increase your commission opportunity per sale. For a deal with a margin of $800,000-$999,000, you will earn $15,000 in commission and the supporting sales person(s) will receive a total of $10,000 in commission.  For a deal with a margin over $1,000,000, you will earn $20,000 in commission and the supporting sales person(s) will receive a total of $15,000 in commission.

c.      The Americas – for these sales, we will amend your commission opportunity to a $7,000 per system.  (This shall replace the previous 17.5% override commission up to a threshold of $40 million commission value and 30% thereafter).

2.      You will no longer be required to oversee or provide support to, nor will you receive commission overrides for, theatre sales in the EMEA or Asia.

All other details of your employment agreement with IMAX Corporation shall remain unchanged, including your title, reporting structure, base salary, equity opportunity, benefits, vacation entitlement, position and office location. In addition, you will continue to lead and oversee the Sales organization.  This includes setting the general strategy for the sales team, partnering with the Marketing for sales initiatives and events and running the ASM.

Title: President, Institutional and Strategic Sales, and EVP Sales, IMAX Corporation

Top Priorities (75% of time; Reporting to President, IMAX Theatres)

1.      Institutional Sales (#1 TOP PRIORITY)

•        This includes direct oversight and Sales Management to the VP Museum Sales and Client Services

2.      Sales in the Americas

•        Provide direct oversight and Sales management to the VP Sales Americas for commercial activity in Latin America as well as, for 2015, oversight and Sales management to VP, Sales Americas for North America exhibitors excluding AMC, Regal and Cineplex

3.      General Management Support and Administrative Activities

•        Provide sales and technical support for the Sales activities for our core Theatre Sales team on a worldwide basis, including the development of Sales and Marketing deliverables, Sales event planning and execution for major conferences and events, as well as the Annual Sales Meeting (in partnership with Marketing)

•        Provide oversight of the annual Sales budget, including providing quarterly feedback to the various regional heads as well as to the President IMAX Theatres

•        Provide oversight and management to the IMAX Theatre Design department

•        Provide oversight and management of IMAX After Market Sales

4.      Lead the Sales and Marketing for the IMAX Private Theatres (Reporting to the President, IMAX Theatres)

Other Responsibilities (25% of time)

5.      On a two year interim basis lead Sales and Marketing of the IMAX Home Theatre JV with TCL as outlined on page 2 (Reporting to the CEO, JV)

Compensation:

Base salary, equity opportunity, benefits, vacation entitlement, office location will all remain the same, although 25% of Base Salary is allocated to IMAX Home Theatre (TCL JV), with management bonus and Sales Team Bonus as described below.

Commission earnings:

The commission earnings for Institutional Sales, IMAX Private Theatre Sales, and the Americas Commercial Sales will remain the same as the latest agreement (Dated June 19, 2014) with the exception that you will no longer be eligible for commissions on deals with AMC, Regal and Cineplex.

The IMAX Home Theatre (TCL JV) bonus and commissions would work as follows:

a.      If company target of signings is met, “Sales Team Bonus” of 50% of base salary is paid to you;

b.      For every sales/unit sold above the company target that you close, you will receive a 2% commission on whole price (~$6K USD /unit); and

c.      For every sales/unit sold above the company target that someone else closes you get a 0.5% override commission on wholesale price (~$11.5 K USD/unit).

(Note: 2015 target is 60 signings; 2016 target is 150 signings)

IMAX Home Theatre JV specific responsibilities:

Will provide oversight and approval for:

1.      Development of global market plan

2.      Development of market entry plans (China and the Gulf to start)

3.      2015 Events plan

4.      B to C and B to D development of channel Sales strategy for all global markets, and B to B development of Sales channel outside of China

5.      Strategic partner/integrator development plan

6.      Input in all channel presentations and meetings

Will provide input into:

1.      Selection of marketing agency

2.      All stages of product design

3.      All demo room design

4.      All presentation materials.

Travel to Shanghai twice per quarter with an office available for use in the JV offices in Zhizhu.  All travel as per IMAX travel policy. You will be part of the JV Exec management team and will participate in all JV board meetings. You will be entitled to a JV Management bonus of 20% of Base Salary and a Sales Team Bonus of 505 of Base Salary (see above).  Term of the secondment will be 2 years (beginning Mar 1, 2015) and the parties agree to negotiate any extension in good faith commensurate with the performance of the individual and the JV).

This letter will confirm our meeting today in which I advised you of the termination of your employment with IMAX Corporation (the “Company”) effective as of March 31, 2016 (the “Termination Date”).

Between today’s date and the Termination Date, you will be continue to be paid your regular base salary on a regular payroll basis and to participate in the Company’s benefit plans in accordance with the current terms and conditions of your employment.  You will not be required to report to the office during this time, but you are expected to transition your matters, and to cooperate fully with the Company and make yourself reasonably available to respond to requests concerning matter with which you have had direct involvement or may otherwise be within your knowledge.

Between today’s date and the Termination Date, you will continue to be eligible to receive any ongoing commissions accrued and unpaid up to today’s date, in accordance with and subject to the Company’s Sales Commission Plan.  You will also be eligible to accrue new commissions between today’s date and the Termination Date. Subject to the condition set forth in Paragraph 5(f) below, following the Termination Date you will be eligible to receive fifty percent (50%) of any ongoing commissions which remain unpaid as of the Termination Date, less any advance commissions paid to you as of the Termination Date.  All such commissions will be paid in accordance with the normal payment schedule.

Between today’s date and the Termination Date, any Awards granted to you up to today’s date will continue to vest in accordance with and subject to the Company’s 2013 Long Term Incentive Plan (“LTIP”) and any applicable Award Documents.  Please note that we are extending your employment until March 31, 2016 specifically for the purpose of permitting you to receive the benefit of the vesting of Awards that are scheduled for March 7, 2016, March 8, 2016 and March 25, 2016, and which would have been forfeited if your employment had terminated prior to those vesting dates.  Any Options that have vested as of the Termination Date may be exercised for 30 days following the Termination Date, in accordance with the LTIP and Award Documents. Any Awards that have not vested as of the Termination Date will be cancelled and forfeited without any consideration.

The Company will reimburse you for all outstanding expenses you have properly incurred up to and including the Termination Date.  …

Please return all Company property in your possession or under your control immediately, …, together with any Company credit cards or debit cards.

In order to assist you in your transition to alternate employment, the Company is prepared to offer you the following separation package:

1.      Severance Payment

(a)   In addition to the approximately (3) months of working notice of termination we are providing to you, the Company will pay to you a severance payment equal to the sum of the base salary which you would have otherwise have earned had your employment with the Company continued (the “Severance Payment”) for a period of up to thirteen (13) months following the Termination Date (the “Severance Period”). …

(b)   Subject to the February 5, 2015 Employee Confidentiality, Non-Competition and Intellectual Property Agreement between you and the Company (the “Agreement”) you have a legal duty to seek alternate employment or to otherwise mitigate any losses arising from the termination of your employment. …

2.      Payment of Benefit Premiums

Following the Termination Date, you will continue to be eligible to participate in the following benefit plans until the first to occur of the End Date or the expiry of the Severance Period.  …

•        Medical

•        Dental

•        Vision

•        Employee Assistance Program

Your participation in the following benefit plans will cease as of the Termination Date:

•        Car Allowance

•        Short-Term Disability

•        Long-Term Disability

•        Life Insurance

•        AD & D Coverage

•        Global Medical Assistance

•        Any and all other perquisites and voluntary benefits

3.      Option of Converting Life Insurance to an Individual Policy

You have the option of converting your life insurance coverage to an individual policy.  ..

4.      Pension

Your participation in the Company’s Pension Plan will cease as of the Termination Date. …

As you are aware, on January 4, 2016, we provided you with notice of termination of your employment with IMAX Corporation (the “Company”) effective as of March 31, 2016. At that time, we also provided you with a letter confirming the termination of your employment effective as of March 31, 2016, and set out the severance package we were prepared to offer in order to assist you in your transition to alternate employment.

We subsequently agreed to extend your employment beyond March 31, 2016, in order to provide the parties with the opportunity to discuss and resolve the terms of your severance package.

On June 30, 2016, our legal counsel provided your legal counsel with our final offer in order to resolve the terms of your severance package. On July 5, 2016 your legal counsel confirmed that you were not prepared to accept our final offer. That being the case, this letter will confirm the termination of your employment effective as of July 8, 2016 (the “Termination Date”).

Your participation in the Company’s benefits plan ceased as of the Termination Date. …

Your participation in the Company’s Pension Plan also ceased as of the Termination Date. …

On the Company’s next regular pay date, you will [be] paid any base salary and vacation pay accrued and unpaid up to the Termination Date, less applicable deduction[s].  You will also be paid the statutory severance pay to which you are entitled in accordance with the Employment Standards Act, 2000 (Ontario), less applicable deductions.

In accordance with the Company’s Commissions Plan, you will be eligible to receive fifty percent (50%) of any ongoing commissions which remain unpaid as of the Termination Date, less any advance commissions paid to you as of the Termination Date. All such commissions will be paid in accordance with the normal payment schedule.

In relation to the TCL-IMAX JV, you will receive a 2015 sales team bonus in the gross amount of $41,875.00, less applicable deductions, which is equal to 50% of the portion of your base salary attributable to TCL-IMAX, as stated in your job description.  …

In addition, you will receive override commissions on the 20 TCL-IMAX systems contracted above target for 2015, calculated on the basis of $1500.00 per unit, totaling USD $30,000.00, less applicable deductions.  …

You will also [be] eligible to receive a commission with respect to IMAX Private Theatre deals you personally sold and IMAX signed for the period between January 1, 2016 and the Termination Date as long as the terms of those deals were approved by the CEO of TCL-IMAX or the President of the Home Division of IMAX.  …

In accordance with and subject to the Company’s 2013 Long Term Incentive Plan (“LTIP”) and any applicable Award Documents, any Awards (RSUs or Options, as applicable) that have vested as of the Termination Date may be exercised for up to thirty (30) days following the Termination Date, in accordance with the LTIP and any applicable Award Documents. Any Awards that have not vested as of the Termination Date will be cancelled and forfeited without any consideration.  …

(a)        annual base salary of $251,818.00 USD;

(b)        participation in IMAX’s commission plans, as set out in documents dated June 14, 2014 and February 2015;

(c)        participation in IMAX’s Long Term Incentive Plan;

(d)        participation in IMAX’s Stock Option Plan;

(e)        participation in IMAX’s Pension Plan;

(f)         participation in IMAX’s group benefits plan;

(g)        a fitness reimbursement payment of up to $500 per year;

(h)        an executive wellness healthcare spending account of up to $500 per year;

(i)         a car allowance of $750 per month; and

(j)         six (6) weeks’ paid vacation.

a)      What is the length of reasonable notice of termination?

b)      For sales prior to the date of termination, July 8, 2016, is the Plaintiff’s entitlement to commissions reduced by 50% pursuant to the 2002 Commission Policy?

c)      Should the measure of damages for the lost opportunity to earn commissions on sales during the reasonable notice period be based on the three-year average of commissions earned by the Plaintiff in 2013, 2014 or 2015 or solely on the commissions earned by the Plaintiff in 2015?

d)      Is the Plaintiff entitled to damages for the lost opportunity to exercises stock options during the reasonable notice period?

e)      Is the Plaintiff entitled to damages for the Defendant’s failure to make contributions to his pension plan during the reasonable notice period?  If so, what is the value of such loss?

f)        Is the Plaintiff entitled to damages for the value of the lost car allowance, fitness reimbursement payment, executive wellness healthcare spending account and employee benefits plan during the reasonable notice period?  If so, what is the value of such loss?

ANALYSIS

ISSUE #1: IS THIS AN APPROPRIATE CASE FOR SUMMARY JUDGMENT?

•        Affidavit of Larry O’Reilly, sworn July 24, 2017;

•        Affidavit of Mark Welton, sworn September 5, 2017;

•        Transcript of the Cross-Examinations of Larry O’Reilly and Mark Welton;

•        Undertakings Chart in respect of the Cross-Examination of Larry O’Reilly and various documents provided as answers to undertakings; and

•        Detailed list of mitigation efforts from July 5, 2017.

… while the appropriateness of bringing a summary judgment motion must be assessed in the particular circumstances of each case, a straight-forward claim for wrongful dismissal without cause, such as the present one, strikes me as the type of case usually amenable to a Rule 20 summary judgment motion.

[18]      Both parties submit that this motion for summary judgment will permit the Court to reach a fair and just determination of the issues on their merits.  I agree.  The circumstances of this case are similar to those in Arnone.  Further, there is no allegation that the Plaintiff was dismissed for cause nor is there any dispute regarding the Plaintiff’s length of employment, age, position and compensation as of the date of termination.  I find that the extensive evidentiary record, including transcripts from the cross-examination of both affiants, is sufficient to allow this Court to determine the issues raised by the parties in a fair and just manner.

ISSUE #2: WHAT IS THE LENGTH OF REASONABLE NOTICE OF TERMINATION?

•        The purpose of requiring reasonable notice is to give the dismissed employee an opportunity to find other employment;

•        In determining what constitutes reasonable notice of termination, a court must the length of notice, a court must consider:

o   The character of employment;

o   The length of employment;

o   The age of the employee at termination; and

o   The availability of similar employment having regard to the experience, training and qualifications of the employee: Bardal v. Globe & Mail Ltd., (1960), 1960 CanLII 294 (ON SC), 24 D.L.R. (2d) 140 (Ont. H.C.), at p. 145.

•        The determination of what period constitutes reasonable notice of termination is a principled art and not a mathematical science that turns on the particular facts of each case. There is no “right” figure for reasonable notice.  Most cases yield a range of reasonable figures;

•        A longer notice period will usually be justified for older long-term employees;

•        Generally, the longer the duration of employment, the longer the reasonable notice period;

•        A longer notice period is provided for senior management or highly skilled and specialized employees and a shorter period is provided for lower rank or unspecialized employees; and

•        Economic factors such as a downturn in the economy or in a particular industry or sector of the economy may indicate that an employee may have difficulty finding another position and may justify a longer notice period.

•        2015- $1,704,603.90 CDN

•        2014- $844,508.74 CDN

•        2013 - $1,999,838.53 CDN

•        2015 - $393,019.59 USD

•        2014 - $410,075.88 USD

•        2013 - $609, 384.33 USD

 

ISSUE #3:  FOR SALES PRIOR TO THE DATE OF TERMINATION, IS THE PLAINTIFF’S ENTITLEMENT TO COMMISSIONS REDUCED BY 50% PURSUANT TO THE 2002 COMMISSION POLICY?

PURPOSE:  To provide a strong incentive to increase the number of theatre sales and to secure strong contributions for the company.  This plan is further intended to strongly encourage teamwork between employees working Film Sales and Theatre Sales by rewarding the team for the achievement of targeted goals.

A)   COMMISSION CALCULATION.  The commission will be based on the contract value as determined by the Company. …

B)     PAYMENT TIMING.  For each deal signed, the commission outlined above will be allocated among the Salespersons responsible for the deal (see Sections C and D below) and will be paid on the following schedule:

•        25% of calculated commission after signing when we get first payment;

•        25% when IMAX receives substantive payment of Initial Rent (i.e.> 25%);

•        30% on receipt of 75% of Initial Rent; and

•        20% on opening.

…

C)   COMMISSION PARTICIPATION

1)      Commissioned at Full Rate

•        The representative for a territorial region and business market in which a project falls would be eligible for full commission if …

2)      Commissioned at 25-75% of Full Rate

•        If the General Manager elects to assign the lead for a deal, that individual will get 25-75% of the full commission …

3)      Commissioned at up to 25% of Full Rate

•        The representative for a territorial region and business market in which a project is completed but the representative had little, if any, direct involvement. …

4)      Commissioned at up to 25% of Full Rate

•        Any other rep who contributed strongly to securing the deal …

5)      Management Override

•        Direct line manager gets 25% of full commission payable on the deal …

D)   IMPACT OF MARKET/TERRITORY/JOB CHANGE ON COMMISSIONS

…

            COMMISSION PAYMENT ON TERMINATION

Employees are eligible to receive 50% of their ongoing commissions at the time that they terminate employment, less any advance commissions paid to them in the form of a draw.  Such commissions will be paid on the basis of the normal payment schedule as outlined above.

This policy will periodically be reviewed and changes will be made as appropriate to best achieve company objectives. [Emphasis added.]

•        the last two contracts of employment that he signed with the Defendant do not reference the plan nor address any disentitlement to commissions in the event of termination;

•        the plan ceased to apply to the Plaintiff when he became Senior Vice-President, Theatre Development and Film Distribution (as well as an officer of IMAX) in January 2003 and was primarily paid a management override on commissions earned byhis Theatre Development team; and

•        in any event, even if the 2002 Commission Plan applies to him, the 50% reduction on termination shown above (the “Reduction Clause”) only applies when an employee resigns.

47       … The overriding concern is to determine “the intent of the parties and the scope of their understanding” [citations omitted]. To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning. …

…

57        While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement [citations omitted]. The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract [citations omitted]. While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement [citations omitted].

58        The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case.  It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract [citations omitted], that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” [citations omitted]. Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact. 

… evidence of the parties’ subsequent conduct is admissible to assist in contractual interpretation only if a court concludes, after considering the contract’s written text and its factual matrix, that the contract is ambiguous.  The court may then make retrospectant use of the evidence, giving it appropriate weight having regard to the extent to which its inherent dangers are mitigated in the circumstances of the case at hand, to infer the parties’ intentions at the time of the contract’s execution. 

ISSUE #4: WHAT ARE THE DAMAGES AT COMMON LAW ARE RECOVERABLE  DURING THE PERIOD OF REASONABLE NOTICE?

When an employer terminates an employee without notice, an implied term of the employee's contract of employment entitles the employer to do so by giving proper notice of termination, during which the employee will continue to work under the terms and conditions of his contract. Alternatively, as happened in this case, an employer can terminate an employee without cause, but without providing proper notice. This constitutes a wrongful dismissal, in breach of the employee's contract, and any payment by the employer in lieu of notice is an attempt at compensation for the breach. This court made that clear in Taylor v. Brown (2004), 2004 CanLII 39004 (ON CA), 73 O.R. (3d) 358 (Ont. C.A.), at para. 15:

Proper notice of termination is an implied term of the contract of employment; payment in lieu of notice is not. We agree with the opinion of Lambert J.A. in [Dunlop v. B.C. Hydro and Power Authority (1988) 1988 CanLII 3217 (BC CA), 23 C.C.E.L. 96 (B.C.C.A.)] when he states that payment in lieu of notice is seen as "an attempt to compensate for [the employer's] breach of the contract of employment, not as an attempt to comply with an implied term of the contract of employment".

The basic principle in awarding damages for wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer's breach of contract in failing to give proper notice. The damages award should place the employee in the same financial position he or she would have been in had such notice been given: [citations omitted]. In other words, in determining damages for wrongful dismissal, the court will typically include all of the compensation and benefits that the employee would have earned during the notice period: [citations omitted].

Should the measure of damages for the lost opportunity to earn commissions on sales during the reasonable notice period based on the three-year average of commissions earned by the Plaintiff in 2013, 2014 or 2015 or solely on the commissions earned by the Plaintiff in 2015?

Is the Plaintiff entitled to damages for the lost opportunity to exercises stock options during the reasonable notice period?

RSUs

 

Type of Equity	Grant Date	Vesting Date	Number of RSUs	Strike Price	Share Price on Exercise Date	Damages Claimed (USD)
LTIP RSU	June 12, 2013	December 1, 2016	2,850	None	$31.05	$88,492.00
LTIP RSU	March 7, 2014	December 1, 2017	3,821	None	$24.55	$93,805.55
LTIP RSU	March 7, 2015	March 7, 2018	2,496	None	$32.45	$80,995.20
LTIP Stock Option	March 7, 2014	March 7, 2017	3,316	$27.82	$32.45	$15,353.08
LTIP Stock Option	March 7, 2014	March 7, 2018	3,982	$27.82	$20.85	None
LTIP Stock Option	March 7, 2015	March 7, 2017	3,104	$33.80	$32.45	None
LTIP Stock Option	March 7, 2015	March 7, 2018	3,104	$33.80	$20.85	None
Stock Option	March 8, 2012	March 8, 2017	7,500	$25.82	$32.45	$49,725.00
Stock Option	March 8, 2013	March 7, 2017	3,000	$25.44	$32.45	$21,030.00

 

This Agreement sets forth the general terms and conditions of Restricted Share Units (“RSUs”).  By accepting the RSUs, the Participant agrees to the terms and conditions set forth in this Agreement and the IMAX 2013 Long Term Incentive Plan. …

4. Termination of Employment Generally.  In the event that the Participant’s employment with the Company terminates for any reason other than death, Disability or for Cause, the RSUs shall cease to vest and any unvested RSUs shall be cancelled immediately without consideration as of the date of such termination. Any vested RSUs shall continue to be settled on the applicable Settlement Date.

5.  Death; Disability.  If the Participant’s employment with the Company terminates as a result of the Participant’s death or Disability, a portion of the RSUs shall vest such that, when combined with previously vested RSUs, an aggregate of 50% of the RSUs granted pursuant to the Agreement shall have vested.  Any vested RSUs shall be settled on the applicable Settlement Date and any unvested RSUs shall be cancelled immediately without consideration as of the date of termination.

6.  Termination for Cause. If the Participant’s employment with the Company terminates for Cause, any outstanding RSUs, whether or not vested, shall be cancelled immediately without consideration as of the date of termination, and the Participant shall have no further right or interest therein. [Bold italics added.]

Stock Option Grants under the LTIP

In the event that the Participant’s employment with the Company terminates for any reason other than death, Disability or for Cause, the Options shall cease to vest, any unvested Options shall immediately be cancelled and revert back to the Company for no consideration and the Participant shall have no further right or interest therein.  Any vested Options shall continue to be exercisable for a period of thirty (30) days following the date of such termination …  To the extent that any vested Options are not exercised within such period following termination of employment, such Options shall be cancelled and revert back to the Company for no consideration and the Participant shall have no further right or interest therein. [Bold italics added.]

Stock Option Grants under the Stock Option Plan

…

(a)   In the event that a Participant’s employment, consulting arrangement or term of office with the Company or one of its Subsidiaries terminates for any reason, unless the Board or the Committee determines otherwise, any Options which have not become Vested Options shall terminate and be cancelled without any consideration being paid therefor.

•        If the bonus was an integral part of the employee’s compensation and thus damages on account of a lost bonus was a component of the employee’s common law right to damages for breach of contract; and

•        Any wording of the bonus plan, that unambiguously alters or removes the employee’s common law right to damages for a lost bonus:  Paquette v. TeraGo Networks Inc., 2016 ONCA 618 at paras. 30-31; Singer, paras. 21-24; Bain v. UBS Securities Canada Inc., 2018 ONCA 190, 46 C.C.E.L. (4th) 50 at para. 9.

…the termination contemplated must, I think, mean termination according to law. Absent express language providing for it, I cannot conclude that the parties intended that an unlawful termination would trigger the end of the employee's option rights. The agreement should not be presumed to have provided for unlawful triggering events. Rather, the parties must be taken to have intended that the triggering actions would comply with the law in the absence of clear language to the contrary.

Assuming that the pension plans can be read as requiring active service as a prerequisite for the accrual of pension benefits, I find unpersuasive the argument that this precludes damages as compensation for lost pension benefits. This argument, it seems to me, ignores the legal nature of the respondent's claim. The claim is not, as I have said, for the pension benefits themselves. Rather, it is for common law contract damages as compensation for the pension benefits the respondent would have earned had the appellant not breached the contract of employment. …

… an express provision providing for the very event that occurred.  The contract does not say that a dismissed employee is disentitled to damages as compensation for the loss of pension benefits that would have accrued during the notice period.

Is the Plaintiff entitled to damages for the Defendant’s failure to make contributions to his pension plan during the reasonable notice period?  If so, what is the value of such loss?

The proper approach to the determination of [the employee’s] loss of the added contribution to his pension would be to determine the present value of the difference between the value of the pension at the time pension contributions ceased (in this case, May 8, 2006) and the time they would have ceased, had reasonable notice been given: Levitt, The Law of Dismissal in Canada, 3^rd ed. Looseleaf (Aurora, Ont: Canada Law Book, 2003), at para. 9:10.140.  In the absence of such evidence, the value of the pension contribution is a reasonable measure of damages.

Damages for the Value of Lost Benefits During the Period of Reasonable Notice?

(a)   a car allowance of $750 per month;

(b)   a fitness reimbursement payment of up to $500 per year;

(c)   an executive wellness healthcare spending account of up to $5,000 per year; and,

(d)   a comprehensive employee benefits plan for which the Defendant paid $886.23 per month.

CONCLUSIONS

(1)   The Plaintiff is entitled to a 24 month period of reasonable notice of termination;

(2)   The Plaintiff’s base salary at the time of his termination was CDN $335,000.12.  The Plaintiff is entitled to the payment of base salary during the reasonable notice period less any amounts already paid and less any amounts received by way of his mitigation efforts;

(3)   The Plaintiff’s entitlement to commissions earned prior to the date of termination and commissions that he would have earned during the reasonable notice period shall not be reduced by 50% pursuant to the 2002 Compensation Plan;

(4)   The calculation of the lost commission income during the reasonable notice period shall be based solely on the commission income earned by the Plaintiff in 2015;

(5)   The Plaintiff is awarded damages for the lost RSUs and stock options that would have vested during the reasonable notice period had his employment not been terminated without cause; 

(6)   The Plaintiff is awarded damages for the value of the pension contributions that would have been made by the Defendant during the last 18 months of the reasonable notice period; and,

(7)   During the reasonable notice period, the Plaintiff is entitled to damages for a car allowance of $750 per month and a comprehensive employee benefits coverage plan of $886.23 per month.

 

 

Mr. Justice M. Faieta

 

Released: January 25, 2019

 

 

 

CITATION: O’Reilly v. Imax Corporation, 2019 ONSC 342

                                                                                      COURT FILE NO.: CV-16-561057

DATE: 20190125

ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
LARRY O’REILLY   Plaintiff   – and –   IMAX CORPORATION Defendant
REASONS FOR DECISION
Mr. Justice M. Faieta

 

Released: January 25, 2019