A small British Columbia company that fired a senior employee when it ran out of money must pay him his contractual severance after failing to convince the province’s Supreme Court it found cause for dismissal after the fact.
Dave Pires, 40, was a senior engineer with a printing equipment manufacturer in Vancouver for 11 years. In 2004, a colleague of Pires, Doug Manness, left the company and formed his own. The new company, Vectis Technologies, used a printing process with fewer chemicals which Manness had developed.
Pires and Manness continued to meet occasionally and Manness repeatedly told Pires he would like his former colleague to come work for Vectis. Pires didn’t want to at first, but by January 2005 he became interested. Two months later, the two men began negotiating the terms of Pires’ employment with Vectis.
They agreed to an employment contract on April 27, 2005, which gave Pires the title of engineering manager at Vectis and a start date of June 6, 2005. A three-year probationary period and annual salary reviews were included in the contract. Also, the contract allowed termination for cause without any notice or further compensation and termination without cause accompanied by “prior written notice of three months plus three weeks for each complete year of employment with the company to a maximum of one year.”
In November 2005, Vectis missed deadlines in the development of its printing technology due to some glitches. Pires was unable to solve the problem to Manness’ satisfaction and he felt Manness was too involved with the company’s research rather than concentrating on finding investors and markets.
By April 2006, Vectis was going through financial difficulties and the senior engineers proposed pay cuts in exchange for additional stock options. Pires refused and insisted they stick to his employment contract. He also felt Manness was pressuring him to help finance the company.
In May 2006, with Vectis in dire financial straits, a prospective investor said he would invest if family and friends of the company and its employees also invested $50,000. Manness asked Pires to raise $5,000 to $10,000 from his family and friends and to forego his annual pay increase. Pires said he couldn’t afford to skip the increase and wasn’t comfortable approaching family and friends to invest.
An existing investor was considering investing further in Vectis and met with Pires and another Vectis employee on June 5. At the meeting, Pires told the investor he didn’t agree with Manness’ decisions in running the company and “had reservations” about making joint decisions with him. He also said Manness wasn’t performing well as Vectis’ CEO.
Pires and three other senior employees discussed the investor’s proposal and agreed they need some of Manness’ shares to make it worthwhile staying with Vectis if the deal went through. After being told of the request for more shares, Manness called them into his office and told them they were being terminated because Vectis was out of money and couldn’t pay them anymore. Pires’ termination letter said he would be given one week’s severance pay and the rest required by his contract “when sufficient funds are available.”
However, two months later, in August, Manness came to the conclusion that Pires’ behaviour in meeting with the investor was a breach of trust and constituted just cause for dismissal. As a result, he didn’t give Pires the additional payment required by his contract.
The court found Pires’ conduct when meeting with the investor was not enough to constitute cause for dismissal.
“While it may have been more politic for Mr. Pires to refuse to join in (the investor’s) assessment of Mr. Manness’ strengths and weaknesses, I am not persuaded that Mr. Pires’ criticisms of Mr. Manness’ abilities as a manager constituted a breach of his obligations owed to Vectis,” the court said.
The court also found the attempt to gain a bigger stake in the company by Pires and the other employees didn’t undermine Manness and they were trying to compensate for the risk they were taking by staying with the company during a financially unstable time.
Because there wasn’t sufficient cause for dismissal, the court ordered Vectis to pay Pires the amount stipulated in his contract for dismissal without cause, which was three months plus three weeks.
“Mr. Pires was dismissed by Vectis for precisely the same reason the other employees’ employment was terminated — the company had run out of funds and could no longer pay them,” the court said.
For more information see:
Pires v. Vectis Technologies Inc.
, 2008 CarswellBC 1424 (B.C. S.C.).
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