Patricia Serrao worked for four years as an options trader for the National Bank of Financial Inc. until her employment was summarily terminated. The company didn’t dispute that Serrao was entitled to reasonable notice, and offered her more than $2,300, an amount representing four weeks of her annual $30,000 salary. Serrao filed an action seeking more.
Serrao and the defendant had entered into a written contract of employment whereby, after deductions were made for costs, she was paid 50 per cent of the profits she made as a trader. A portion of her commission went into a reserve account that was set up as a mutual protection against future losses. If there were insufficient funds in the reserve to offset losses, the balance was to be made up using future commissions.
The nature of the trading was such that profits and losses fluctuated from month to month but Serrao was a very successful trader. She earned $302,000 in 1999; $794,000 in 2000; $379,000 in 2001; and $53,000 in 2002.
Serrao’s earnings fell sharply in her last year of employment. In the four months before termination she did not make any profits and there was a negative balance of $92,000 in the reserve account. Serrao’s management did not think she would be able to reverse her trend of losses and in accordance with a provision in the employment contract she was terminated.
At trial Serrao claimed her losses were because the defendant’s technology system had often malfunctioned, denying her information or the ability to act on information and because management had directed her to stop trading in mid-2002. The Ontario Superior Court of Justice agreed and set the appropriate notice period at 12 months.
Serrao was 36 when terminated so age wasn’t a significant factor in assessing damages. But her position had been one of a high level of responsibility, with a corresponding high level of potential reward and risk. Furthermore, the job market for options traders was small to begin with, and at the time of her termination it was shrinking, ruled the court.
The court was then faced with determining what 12 months’ income for Serrao would be. The defendant argued she could not possibly have earned more than her base salary. The court rejected this, noting it isn’t possible to accurately predict what an options trader’s performance will be in the future.
“The use of an historical average is least unfair both to the employer and the employee,” ruled the court, especially when an employee’s income fluctuates from year to year. In this case, however, there was only a four-year history to go by. The court ruled the income for both 2000 and 2002 were “extraordinary” and ultimately averaged the incomes from 1999 and 2001 in arriving at a 12-month period of notice amount of $341,000 plus incidental job search and benefits plan expenses.
Against that amount the court deducted the $2,300 Serrao had originally received, and also the $92,000 negative balance in the reserve account. Since had she continued to work during the period of reasonable notice, her revenue would have gone towards making up the negative balance, it ruled. She was ultimately awarded $247,191 plus interest.
For more information see:
Serrao v. National Bank of Financial Inc.
, 2004 CarswellOnt 2748 (Ont. S.C.J.)
© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.