Lawyer’s Weekly

 

May 21, 2012

 

Title: Gilman decision to be appealed

 

The ink is barely dry on last month’s Gilman c. Fieldturf Tarkett Inc. decision but latter has decided to keep fighting. “The judgement has been (appealed),” confirmed Karl Delwaide, partner at Fasken Martineau Dumoulin and counsel for the defendant (now known as Tarkett Inc.). “Our inscription raises important issues of law, such as the differences between signing bonuses and incentive programs like “phantom shares,” and the conditions for granting such.”

 

According to Zavie Levine, a partner at Levine Frishman Lancry, counsel for plaintiff, the appeal was not surprising given the large amount of money involved. “The $1.79 million award granted to the five ex-Fieldturf employees, relating to payments they felt that they had been unjustly denied, made the appeal almost a foregone conclusion,” said Levine in an interview from his hospital bed, where he was awaiting triple-bypass surgery. “They were terminated or forced to resign just prior to the eligibility date. That was clearly unfair.”

 

According to Gabriel Granatstein, a blogger and labor law specialist who works for a major Canadian retailer, the decision, delivered in English, in Quebec Superior Court, by Justice David Collier provides an interesting look employment law in the French-Canadian province, particularly related to executive eligibility for bonus payments. “I don’t often get to read decisions in my native language,” said Granatstein. “But this one merits attention in the rest of Canada, both because it is well-written and sound, but also because it summarizes civil employment law concepts in a language which they can understand.”

 

 “The law in Quebec is settled that an employee who is terminated without cause is entitled to receive all of the benefits that accrue during the notice period, including bonuses,” wrote Collier in his judgement. “Since the plaintiff’s entitlement to receive a phantom share bonus vested on December 31, 2008 i.e. during their respective notice periods, the plaintiffs (David) Moszkowski, (Kenneth) Gilman, (Kevin) Reynolds, and (Jim) Petrucelli are eligible to receive their bonuses notwithstanding their dismissal on September 2008.” Collier also granted a fifth plaintiff Troy Squires’ request for the same reasons.

 

 

English Canadians will have to work a little harder however, to hack their way through Delwaide’s 17-page appeal, which was filed in French. In it, he asks the court to reject reverse the initial judgement with costs related to both the superior and appeals court proceedings, for several reasons. These include certain errors of fact and admissibility of hearsay testimony.

 

Delwaide also cites a judicial error in not basing the decision on a shareholder purchase agreement made when Gilman sold the company to Fieldturf Tarkett. This agreement stipulated that US $1.4 million be deposited into an account as a contribution to capital, to be set aside for use as payments to be distributed by Gilman as CEO of the Corporation to “to those key employees of the Tarkett Group, as he in his sole discretion shall determine.”

 

The conditions, which seemed simple enough, were complicated by two factors. The first was that Ken Gilman died before he could compile a list of employees that were entitled to the payments. As a result, that responsibility fell upon the new CEO, who was less inclined to rely on the format that Gilman had used in preceding years. The second complication was the stipulation that the employees would only be entitled to the amounts if they were still with the company at the end of 2008.

 

In his decision, Collier noted that although in Quebec law, an employee is not entitled to claim a bonus if the payment is discretionary and depends on the employer, “nevertheless, evidence that a bonus was regularly paid to an employee in the in past may rebut the argument that the attribution was discretionary,” and that the “phantom share program led the plaintiffs to have a reasonable expectation that they would receive a final bonus payment.”

 

However in his appeal Delwaide argues that Justice Collier went too far in concluding that the payments were not at the CEO’s discretion and that he was applying laws related to bonuses, while the facts of the case related to phantom shares, which are more akin to stock options. “The judgement erroneously confused phantom shares, with employment bonuses which existed elsewhere in the appellant and which were taken into account in the calculation of the indemnity that ended their employment….” (our translation)

 

“Although the judgement makes reference to the (shareholder purchase agreement, it does not apply it, or even to examine and analyze it, and this, contrary to the cardinal rule in law that the contract is the law governing the two parties and that the country must apply the contract, particularly if it is clear,” writes Delwaide in his appeal.

 

Levine, from his hospital bed, would not comment on the appeal directly, which he had only recently received and read “I’ve got other things on my mind right now,” he joked with a smile. “But I’ll get back to you on that.”

 

 

Peter@peterdiekmeyer.com

 

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