Tuesday, March 25, 2014

BlackBerry's Executive Vice President isn't allowed to leave

As we all know, BlackBerry's hit some rough times lately.  (That's aside from my own BlackBerry Torch's soon-to-be-hard-times, as it gets thrown against a brick wall and replaced by an Android or iPhone, if I can't solve the problem that it stopped accessing my new email account.  But look at me, one sentence in, and already digressing.)

The Struggling Tech Company Formerly Known As RIM ("BB") acquired a company called QNX in 2010, and with it came a certain employee, Sebastien Marineau-Mes.  It seems that they liked Mr. Marineau-Mes, and as of early 2013 he was a Senior Vice-President, right near the top of the management hierarchy.

However, as we know, the top of the management hierarchy has gone through some changes lately, with Thorsten Heinz succeeding Jim Balsillie and Mike Lazaridis in January 2012, and then stepping down to be replaced by John Chen in November 2013.  And, when the top dog changes, that often creates problems for those who answer to the top dog.  When they met, it began to appear to Marineau-Mes that his role with BB, as Justice McEwen put it, "might ultimately be narrower in scope than originally contemplated".

In the same time frame, Marineau-Mes was talking with Apple about possibly going over to them, and Apple offered him a job as "Vice President Core OS", entailing oversight of the software development of iOS.  Marineau-Mes gave BB his Notice of Resignation on December 23, 2013, and advised them the next day that he would joining Apple in California in two months.

The problem is this:  Under the terms of his contract, he was obligated to give BB six months' notice of resignation.  (Though BlackBerry appears to have sent him home, not requiring his services since January 6, 2014.)

You see where this is going.  BB brought an Application for a declaration that the contractual termination clause is enforceable.  Here's the decision.

Incidentally, BB wasn't looking to actually enforce the contract, and instead merely sought a declaration that it was enforceable and that Marineau-Mes was bound to its terms.  There's a big difference, for a couple of reasons I'll go into in a minute.  Presumably, the application was intended to pre-empt a position being taken by Marineau-Mes' lawyer that the contract couldn't be enforced, based on four arguments.

Argument 1:  Non-Compliance with the ESA

There's a broad requirement on contracts to comply with the Employment Standards Act, 2000, and non-compliance can easily void provisions of the contract.

This is a relatively nuanced and complicated contractual interpretation argument, but the key is this:  The resignation provisions in the contract terminate his entitlement to vacation pay as of his 'last day worked', being distinct from the end of his employment, whereas under the statute vacation pay is still owing for 'inactive' periods of employment.  (As it happens, Marineau-Mes is still being paid, including vacation pay, but that doesn't go to the heart of the question of whether or not the contractual provision is ESA-compliant.)

Justice McEwen didn't agree that Marineau-Mes' last day worked has necessarily passed - in essence, BB is holding him in their employment, and paying him, and reserving the right to consult with him, and so the contractual termination date still hasn't passed.

Respectfully, I might argue that Justice McEwen missed the point:  The question isn't simply a factual one, of whether or not the contract purports to disentitle him to vacation pay...but rather, whether or not it could.  There's solid case law standing for the notion that formulaic non-compliance is sufficient to void a provision, and I think I agree with Marineau-Mes' counsel that the fact that the contract disentitles an employee to vacation pay from the last day worked to the end of his notional employment is probably a violation of the ESA.

Justice McEwen went on to note, in obiter, that even were it otherwise he still wouldn't see the provision as voiding the whole resignation clause:  "In my view, a fair reading of [the case law] leads to the conclusion that the offending term would be considered to be null and void, but not the entirety of the section."

That's a complex issue, and one not considered in a large number of cases - the question is one of 'severability', and the question is usually whether or not the offending provision can be removed while leaving the surrounding context intact.  The relevant contractual provisions are produced in full here, and it is difficult for me to see how you would 'blue pencil' the entitlements language out of the Notice clause while leaving the rest of the Notice clause intact.

Argument #2:  Marineau-Mes Never Assumed his EVP Duties

Not much had happened with the promotion, including its announcement, before Marineau-Mes left. His pay raise happened, however.  The judge was satisfied that this was enough for the EVP contract to be seen as effective.

Argument #3:  The Six-Month Notice Period Amounts to a Non-Compete Clause

Justice McEwen rejected this argument for a few reasons, the most compelling of which in my view is this:  Marineau-Mes is still getting paid by BlackBerry.  That alone makes it very different from a post-employment non-comp clause.

Argument #4:  Marineau-Mes Had "Good Reason" to Terminate the Employment Contract

Did the conversation with Chen, suggesting that his role might not be what was anticipated, give him "Good Reason", within the meaning of the contract?  Justice McEwen is probably right to find that that isn't enough.

But what about sending him home after he gave Notice of Resignation?

Here's the crux:  There's a very-seldom-raised scenario where a senior employee resigns, and then gets told to sit in an empty office and do nothing for 8 hours per day throughout the notice period.  Is this a constructive dismissal?  My thoughts:  Probably.  The departing employee is probably entitled to say, "Yeah, that's not going to happen", and walk out the door.

How about the much more common scenario of notice being 'waived'?  Is that a termination?  Or does it notionally continue the employment relationship on the basis of "We'll pay you to stay home".  And if it's the latter, is that a constructive dismissal?

These are interesting questions, not significantly addressed in the case law, because they don't typically matter...but they're relevant here.  Having given notice, and having been stripped of all of his duties, is Marineau-Mes now entitled to treat the employment relationship as being at an end?

Justice McEwen looks at the question very much from BlackBerry's perspective, that it's "not surprising" that they changed the nature of his duties following him submitting Notice of Resignation.  Respectfully, whether or not it's surprising does not really touch on the question of whether or not they're contractually entitled to make those changes.  Simply, it's a question of whether or not the nature and scope of the changes they made to his duties would create "good reason" to resign within the meaning of the contract, and the fact that he had given notice of resignation is kind of a red herring.  It's not like a residential tenancy arrangement, where my landlord is suddenly allowed to walk new prospective tenants through on next-to-no notice because I told him I'm leaving.

If I give six months' notice of resignation, then yes, I expect to be transitioning my work to someone else, but I also expect to be doing a substantial amount of that work through a substantial period of the notice period, and if somebody takes all the work off of my plate, the message that sends is "This employment relationship is over."

Nonetheless, Justice McEwen allowed BB's application, finding that the contract is enforceable.

What Does That Mean for Marineau-Mes?

Well, here's the rub.  Marineau-Mes argued that BlackBerry isn't entitled to a declaration - basically, that if the contract is enforceable, then they're limited to suing him for their actual damages.  And, given that they've had him sitting at home for almost three months, it doesn't seem that they'd suffer much damages by not having his services anymore.

Justice McEwen rightly assessed that the question of the entitlements flowing from breach don't change whether or not BB is entitled to that declaration, so he didn't really answer that question.  So the next issue is this:  If Marineau-Mes starts working for Apple anyways, what can BlackBerry do about it?

My suspicion is this:  Fire him for cause.  But that would basically put Marineau-Mes where he wants to be.

There are other possibilities as well, of course.  He's probably a fiduciary, so if there's reason to think that he's competing unfairly, there might be a remedy for that.  But the availability of any sort of injunctive relief is fairly dubious in this scenario - again, it's not a non-compete clause.

So BlackBerry completely won on this application.  But it remains unclear to me exactly what they won.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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