Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff’s rejection of Wabtec’s offer was found to be an unreasonable failure to mitigate damages.

• The retention bonus agreement (RBA) and the restrictive covenant agreement (RCA) were held to be separate contracts, not a single integrated agreement.

• The RBA did not contain any assignment restriction, allowing Wabtec to assume GE Transportation’s obligations.

• The employment terms offered by Wabtec were determined to be practically identical to those at GE Transportation.

• The plaintiff’s interpretation of the RCA creating a forfeiture risk for the bonus was deemed unreasonable.

• Appeal was dismissed as no palpable and overriding error was found in the trial judge’s reasoning.

Background and employment history
In 1992, Bradley Brown, the plaintiff, founded Iders Inc. in Oakbank, Manitoba. On December 8, 2016, GE Transportation, a division of the General Electric Company, acquired Iders. As part of the acquisition, Brown executed three agreements: an employment agreement (EA), a retention bonus agreement (RBA), and a restrictive covenant agreement (RCA). Under the RBA, Brown was to receive a $300,000 retention bonus on the five-year anniversary of the acquisition, provided he remained actively employed full-time with GE Transportation and complied with the RCA.

The Wabtec transaction and job offer
In May 2018, General Electric Company began discussions regarding the divestiture of GE Transportation and its merger with Wabtec Corporation. On February 1, 2019, Brown contacted GE Transportation expressing concern about being involuntarily terminated and about how the EA, RBA, and RCA would be affected by the Wabtec deal. He believed that accepting a position with Wabtec could result in forfeiting the bonus under the RBA due to a breach of the RCA, since Wabtec was not an affiliated legal entity of General Electric.

On February 8, 2019, Wabtec offered Brown continued employment on substantially the same terms, including recognition of prior service, current title, reporting structure, compensation, and benefits. Senior management at GE Transportation assured Brown that Wabtec would honor the RBA. Despite multiple discussions and reassurances, Brown declined the offer on February 22, 2019, stating in an email that he was “not accepting an offer of employment with Wabtec as it has been presented.” When the Wabtec deal closed on February 25, 2019, Brown did not become a Wabtec employee and later sued for wrongful dismissal.

Trial court decision
The trial judge found that Brown had been constructively dismissed due to the Wabtec deal but concluded he failed to act reasonably in mitigating his damages by not accepting Wabtec’s offer. The judge held that the RBA and RCA were separate agreements and that the RBA did not include an assignment restriction. The offer letter from Wabtec was interpreted to include the continuation of the RBA, as it formed part of the employment terms at GE Transportation and was not specifically excluded in the offer.

The judge awarded Brown $133,000 as a pro-rated bonus under the RBA for the period he remained employed, but denied the remainder of his claim for $763,640.84. The claim for additional damages was dismissed on the basis that acceptance of Wabtec’s offer would have avoided all claimed damages.

Appeal court ruling
The Manitoba Court of Appeal upheld the trial decision. It agreed that the judge correctly interpreted the RBA and RCA as separate and that there was no legal basis to treat them as a single agreement. The appeal court found no palpable and overriding error in the judge’s conclusion that Wabtec could assume GE Transportation’s obligations under the RBA.

The court also found that the Wabtec offer constituted comparable employment, and that Brown’s refusal was unreasonable in light of the reassurances he received. While the appeal raised issues about the trial judge’s assessment of Brown’s testimony concerning his concerns about the RCA, the court concluded any such error was not determinative of the outcome. As a result, the appeal was dismissed with costs.