Executive Summary: Key Legal and Evidentiary Issues

• Determination of whether Mr. Lischuk was owed vacation pay for earned but unused vacation time at termination, in the absence of a written employment agreement or vacation policy.

• Assessment of the appropriate reasonable notice period for Mr. Lischuk’s termination, including whether “exceptional circumstances” justified exceeding the typical 24-month upper limit.

• Evaluation of whether Mr. Lischuk failed to mitigate his damages by not seeking alternative employment, and whether K-Jay met its burden to prove the availability of comparable jobs.

• Consideration of Mr. Lischuk’s entitlement to annual bonus payments during the reasonable notice period, despite the triggered repurchase of shares under the Unanimous Shareholders Agreement.

• Analysis of whether Mr. Lischuk could claim damages for the increased value of 997’s shares in K-Jay during the notice period, as distinct from the corporate entity’s rights.

• Calculation methodology for damages relating to annual bonus payments, including adjustments for changes in the bonus structure and company financials post-termination.

Background and facts of the case

Glenn Lischuk spent almost his entire working life with K-Jay Electric Ltd., an electrical contractor based in Edmonton. He began as a helper at around age 23, earned his Master Electrician certification, and rose to General Manager in 2008. In 2002, through his company 997878 Alberta Ltd. (“997”), he became a shareholder. K-Jay was founded in 1973 by John Bakker, who later transitioned the presidency to his son, Mark Bakker, in late 2015. During the transition, Mark and John decided to change the company’s direction and management style, resulting in Mr. Lischuk’s termination without cause on November 21, 2013. At that time, Mr. Lischuk’s compensation included a base salary and Christmas bonus totaling $254,000, plus $137 per month in benefits.

Disputes arose regarding compensation owed to Mr. Lischuk and 997, including vacation pay, reasonable notice, mitigation of damages, entitlement to annual bonuses during the notice period, the value of 997’s shares, and the calculation of damages. The parties provided a substantial Agreed Statement of Facts, but disagreed on the application of the law to those facts.

Vacation pay and reasonable notice

The court found that, although there was no written employment agreement or vacation policy, Mr. Lischuk met his onus to establish that he was entitled to eight weeks of earned vacation time in 2013 and had only taken two weeks. Under the Employment Standards Act, K-Jay was required to pay him for six weeks of vacation, amounting to $20,320 (8% of $254,000).

For reasonable notice, the court applied the Bardal factors: character of employment, length of service, age, and availability of comparable employment. K-Jay acknowledged a 24-month notice period, but Mr. Lischuk argued for 26 months, citing “exceptional circumstances” as recognized in Ontario case law. The court found that Mr. Lischuk’s circumstances—including 34 years of service, age 58 at termination, limited transferable skills outside the electrical industry, and the effective “forced retirement”—constituted exceptional circumstances warranting a 26-month notice period, exceeding the rough upper limit of 24 months recognized in Alberta.

Mitigation of damages

K-Jay argued that Mr. Lischuk failed to mitigate his damages by not seeking comparable employment. The court held that the burden remained on K-Jay to prove that comparable jobs were available and that Mr. Lischuk could have obtained one. The evidence did not establish the availability of comparable employment, and the claim for lack of mitigation was dismissed.

Entitlement to annual bonus payments and share value

A significant issue was whether Mr. Lischuk was entitled to annual bonus payments during the reasonable notice period, despite the repurchase of 997’s shares under the Unanimous Shareholders Agreement (USA). The court distinguished between Mr. Lischuk’s rights as an employee and 997’s rights as a shareholder, holding that bonus payments were employment compensation and not strictly tied to share ownership. Applying the two-part test from Matthews v Ocean Nutrition Canada Ltd., the court found that Mr. Lischuk would have received bonus payments during the reasonable notice period and that the USA did not unambiguously limit this entitlement. Therefore, he was entitled to damages for lost bonuses.

The court rejected Mr. Lischuk’s claim for damages based on the increased value of 997’s shares during the notice period. It held that 997 and Mr. Lischuk were separate legal entities, and only 997, as the shareholder, was entitled to share value increases. Since 997’s claim had already been dismissed in a previous decision, Mr. Lischuk could not succeed on this ground.

Calculation of damages

The court adopted a hybrid approach to calculating bonus damages, using both historical and post-termination bonus structures. Mr. Lischuk was awarded 20.9% of the relevant bonus pools for fiscal years 2014, 2015, and part of 2016, with adjustments for company financials and severance accruals. His total damages were calculated as follows: $20,320 for vacation pay; $553,895.33 for base salary, Christmas bonus, and benefits over 26 months; and $948,626 for annual bonuses, totaling $1,522,841.33, subject to applicable tax withholdings and plus interest in accordance with the Judgment Interest Act. The court dismissed his claim for a tax gross-up.

Outcome

The court ruled in favor of Mr. Lischuk, awarding him $1,522,841.33 in damages, subject to tax withholdings and plus interest, with no reduction for failure to mitigate. The allocation of costs and interest was left for further determination if the parties could not resolve these issues within 45 days. Mr. Lischuk was the successful party, and the judgment reflects a substantial monetary award in his favor.