HRMT Employee law

FACT PATTERN:  DISCOUNT FARM MACHINERY LTD. – PLEASE PROVIDE THE NAME OF THE CASE YOU MIGHT BE RELYING ON BUT IT IS NOT NECESSARY TO GIVE THE FULL CITATION.  

Discount Farm Machinery Ltd. is in the business of selling used and new heavy-duty machinery including farm machinery to dealerships and individual farms.  The company has its corporate headquarters in Langley, British Columbia.  In British Columbia, Discount Farm Machinery Ltd have offices in Langley, Kelowna, Prince George and Fort St. John.  It has sales throughout Canada.  The sales for Ontario, Quebec and the Maritime provinces are handled out of Toronto.  The sales for the Prairie Provinces are handled through Regina, Saskatchewan.

There are 15 other companies in British Columbia selling farm machinery.  The job of a Head Salesperson has access to marketing plans of the company.  It would also involve having access to previous technological advances in the new equipment that is coming up for sale.  He has access to the processing of large sums of money when equipment is sold.

Gerald Smith was hired by Discount Farm Machinery Ltd. as Head Salesman of Farm Machinery in March of 2017.  The employment contract which he signed prior to starting work contained the following clauses:

1. A non-competition clause in which he agreed that should he resign his position he agreed that he would not compete, either directly or indirectly with his employer anywhere in Canada for a period of 2 years.
2. A non solicitation clause in which he agreed that he would not attempt solicit any of his employer’s customers, either directly or directly in Canada.
3. A Confidentiality clause in which he agreed he would not use any of the employer’s confidential information for his own purposes.

Gerald Smith was very successful in selling farm machinery in the northern British Columbia area.  He was the face of Discount Farm Machinery in the northern British Columbia area including Prince George and Fort St. John.  He earned a salary of $100,000 and earned a yearly commission that averaged $90,000 for the three years.  He was able to convince the employer to hire his younger brother David as a heavy-duty mechanic based in Langley.

The relationship between the owner and Gerald Smith soured over the last months.  Gerald objected to the heavy-handed management style of the owner.  It came to a head after two events occurred as follows:

• On February 5, 2020 Gerald’s brother David was fired for the reasons set out in the previous Assignment.  David subsequently moved to Edmonton and on March 15, 2020 he incorporated an Alberta company called Progressive Equipment Sales Ltd.  David borrowed a substantial amount of money from his brother Gerald in order to start the new business.
• On March 31, 2020 the owner of Discount Farm Machinery told Gerald that he was reducing the Commission by 12% because of the Covid-19 problem would likely reduce business.

On April 5, 2020 Gerald saw his solicitor.  On April 7, 2020 Gerald told his employer that he did not think it was right that his commissions were being reduced and he would be considering resigning from the Company if the owner continued with this policy.  The parties met on April 8, 2020 and the discussion became very heated.  The owner told Gerald the reduction of commission was necessary for the survival of the business.  The employer told then told Gerald that he accepted his resignation and he demanded that Gerald leave the premises immediately.  When Gerald objected security was called and Gerald was escorted off of the premises in front of other employees.

On April 20, 2020 Gerald’s solicitor wrote to the employer stating that Gerald this amounted to a wrongful dismissal and demanded 1 ½ years salary plus punitive and moral damages.  The employer refused the demand.

The owner wrote back to Gerald’s solicitor stating that Gerald had been plotting with his brother to leave the company and take confidential property with him.  The letter stated he had just cause to dismiss him.

A day later the solicitor for the employer wrote to Gerald’s solicitor stating that he had instructions to offer a settlement in which they would give Gerald 3 months salary provided that Gerald signed a full and final release and complied with all of the provisions of the employment agreement.  Gerald rejected the proposal.  On May 15, 2020 Gerald moved to Edmonton, Alberta.

On March 15, 2020 David (Gerald’s brother) incorporated a company in Alberta called Progressive Equipment Sales Ltd.  In order to do so David borrowed a large amount of money from his brother Gerald.  Gerald and David had general discussions about leaving Discount Farm Machinery in 2019 and forming a new company that sold heavy duty machinery to the gas and oil industry.  They proposed the company could be based out of Edmonton, Alberta and could access customers in the Fort St. John area.  However, no company was formed in 2019 and the idea of setting the new company was general discussion only.

On July 1, 2020 David transferred 75% of the shares in Progressive Equipment Sales Ltd. to his brother Gerald.  Gerald had provided most of the money to start up the company but did not wish to be a shareholder or director until after his employment with Discount Farm Machinery Ltd. had come to an end.

The company was not able to pay Gerald any money April, May, June, July and August.  In September the company paid Gerald $6500 a month and this continued for the remainder of 2020.  The company became very successful and in 2021 Gerald was earning $15,000 a month including commissions.

Many farmers from northern BC moved their business from Discount Farm Machinery Ltd. to Progressive Equipment Sales Ltd.  Gerald and his brother had good reputation.  It was much easier to do business with a company in Edmonton rather than Langley.  Discount Farm Machinery Ltd. did not hire someone to replace Gerald until 2021 because of the expected reduction in business caused by the Covid-19 virus and this upset some of their customers because they were not serviced properly.

Gerald did not approach any of the customers he had developed while working for Discount Farm Machinery Ltd. although the company advertised in the area.  From August 15, 2020 to December 31, 2020 Discount Farm Machinery lost $300,000 in business.  About 60% of the business of Progressive Equipment Sales Ltd. came from the oil and gas business northern Alberta and Saskatchewan.

Fully Discuss the following:

1. What claims if any does Discount Farm Machinery Ltd have against David Smith, Gerald Smith and/or Progressive Equipment Sales Ltd.  Identify all remedies Discount Farm Machinery Ltd might seek.  Raise all defences.  Who will win?  Why or why not?
2. What claims if any does Gerald Smith and/or Progressive Equipment Sales Ltd. have against Discount Farm Machinery Ltd.  Identify what remedies they might seek.  Raise all defences.  Who will win?  Why or Why not?