In Ross v Newly Institute Inc., 2026 ABKB 538 (Banks, J), the Alberta Court of King’s Bench found the employee was entitled to $300,000 in severance for wrongful dismissal despite an array of defences by the employer.
This case is important because of its direction on what qualifies as termination, resignation, job abandonment and insolence. Its also an important reminder that termination clauses can only potentially be enforceable if the new contract is supported by fresh consideration – which has to actually be paid.
Facts
The following were the pertinent facts summarized by the ABKB:
- The plaintiff employee, Dr. Marshall Ross, was employed by the Newly Institute as Chief Scientific Officer
- Dr. Ross was given shares and signed an initial employment contract. He received a promotion in December of 2021 and signed a new employment contract stating that he would receive a $500 signing bonus, which he received (the “December Employment Contract”).
- The December Employment Contract contained a termination clause indicating that he’d receive $300,000 in severance on termination of employment without cause
- The employer had to pay severance to several employees around this time, and decided it needed to reduce the severance provided by the termination clauses in the contracts
- Dr. Ross was presented with a new document in March, 2022 which was almost identical to the last one, including that he’d receive a $500 signing bonus. However, the severance clause was significantly less valuable to Dr. Ross (the March Contract)
- He signed the March Contract but never received the $500 signing bonus for that contract
- In the first half of July, 2022, there were significant personnel changes and restructuring.
- On July 12, 2022, Dr. Ross was placed on a paid administrative suspension. He received an email from the President indicating, “no one has planned any termination” and that Dr. Ross was still part of the team
- Around this time, the employer’s CEO indicated to Dr. Ross that he may have made a mistake in terminating 2 employees. He asked Dr. Ross to speak to them and see if they would return
- On July 14, 2022, Dr. Ross and the CEO met. Ross explained that the staff had lost confidence in the CEO, and the only way to restore operations was for the CEO to resign and fill a different role at the institute. He suggested the CEO could become President instead, give a token of founders’ shares to the 2 employees they wanted back and to Dr. Ross, and to terminate the employment of one other specific employee. Dr. Ross suggested using an executive search firm to fill the CEO spot
- That night, the CEO emailed Dr. Ross at his personal email, stating that he could not live with the “demands for you [and the other 2 employees] to come back. We wish the three of you all the best in your future endeavors”. Ross’ email access at Newly Institute was cut off
- Ross emailed back that night stating that he needed email reinstated to continue working and he had some meetings the next day. The CEO did not respond and email was not restored
- A few days later, Dr. Ross’ legal counsel demanded his severance. The employer denied he had been terminated and stated that he was to report for work or resign within a few days, and if he did not resign he’d be considered to have abandoned his employment
- The employer did not issue a Record of Employment (ROE), and only ended payroll after it said he would be considered to have abandoned employment
- Dr. Ross sued for wrongful dismissal and the severance under the December Employment Contract, alleging that his employment was terminated in July 2022
- The Newly Institute defended, alleging that:
(1) Dr. Ross’ resigned or abandoned his employment, he was not terminated
(2) Even if he was terminated, there was just cause for termination due to insolence and an attempt at hostile takeover of the company
(3) Even if there was no just cause, Dr. Ross was only entitled to the March Contract payment, not the larger December Employment Contract payment
Analysis / Conclusion
The Court found that Dr. Ross’ employment was terminated, he did not resign or abandon his employment. The key evidence for termination was the email wishing Dr. Ross well in his future endeavors, the cutting of his email access, and the failure to respond to Dr. Ross’ email requesting restored access.
Some of the important reasoning in dismissing the employer’s arguments of resignation and job abandonment included as follows:
[67] The Newly Institute submits that at no time did it communicate that Dr. Ross was terminated, nor did it provide notice of termination, issue a Record of Employment indicating a dismissal, or end payroll for Dr. Ross until his resignation and / or the abandonment of his employment at the Newly Institute. But, it is the substance that matters. Despite not doing these formal steps, the substance of what transpired was clear – Dr. Ross’s employment had been terminated. [underline added]
[…]
[71] The totality of the conduct of the Newly Institute clearly indicates that it had terminated Dr. Ross’s employment, when considered objectively and in light of all of the circumstances. Further, even if Mr. Kwan did not subjectively intend to terminate the employment of Dr. Ross, objectively that was the effect of the totality of the Newly Institute’s actions.
The Court next considered the argument that the employer had just cause to dismiss Dr. Ross for alleged insolence and alleged attempt at a hostile takeover. The key evidence on this point was the exchange between Dr. Ross and the CEO where Dr. Ross suggested he resign as CEO, give some shares to the 2 employees they wanted back (and Dr. Ross), and terminate another specific employee. The employer argued this was akin to an attempted hostile takeover.
The Court cited authority that just cause is the “capital punishment” in employment law, and that the employee’s behavior must give rise to a breakdown in the employment relationship to qualify. The Court also cited authorities specific to insolence just cause, including that insolence itself requires something in the vein of insulting, abusive, hostile, contemptuous or threatening words or body language.
The Court then summarized the test for where insolent behavior can qualify as just cause by citing McDonald v Sproule Management GP Ltd., 2023 ABKB 587 (Marion, J) as follows:
[83] Marion J. added at para 79:
Insolence can justify summary dismissal of an employee if: (1) the employee and superior are no longer capable of maintaining a working relationship; (2) the incident undermined the supervisor’s credibility in the workplace and, relatively, their ability to supervise effectively; or (3) that because of the incident, the employer suffered a material financial loss, a loss of reputation or its business interests were seriously prejudiced: Motta at para 53; Henry at para 111. Context and proportionality govern, including where strong exchanges have been a tolerable part of the culture of the workplace […]
The Court concluded that Dr. Ross had not been insolent when he made his suggestions because the context indicated that he was asked to see how to get these employees back and he presented the options in a polite and respectful manner.
This led the Court to conclude that Dr. Ross’ was wrongfully terminated and he was entitled to severance pay.
The Court then considered the employer’s argument that the March Contract governed Dr. Ross’ severance entitlements, not the December Employment Contract.
Dr. Ross argued that the March Contract was unenforceable for not being supported by any fresh consideration – he said the $500 signing bonus was never paid. The employer argued it had been paid, but the Court found it had not been.
The employer had a somewhat novel additional argument. They argued that the new contracts were needed to address expensive severance clauses for employees – which was of benefit to the employer and its shareholders.
The Court ultimately rejected this argument and found that the March Contract was not supported by any fresh consideration. It referred to a $500 signing bonus which was was never paid, which concluded that issue. The Court also noted, the evidence did not support that the employer’s financial situation was part of the bargain with Mr. Ross.
An employee terminated without cause in Alberta is entitled to severance pay.
An employee terminated without cause in Alberta is entitled to severance pay.
As a result, Dr. Ross was awarded damages of the full severance payment indicated in the December Employment Contract, which was $300,000.
My Take
This case is really interesting to me.
I am not personally surprised this one made it to trial either. I can only speculate on the evidence summarized by the Court, but it seems to me that the July 14 meeting between Dr. Ross and the CEO could have resulted in a successful defence based on resignation or just cause for insolence. An employee proposing this sort of restructure to his superior is extremely dangerous and could potentially have been interpreted as an ultimatum presented by a bloc of Dr. Ross and these 2 former employees. The Court did not interpret it this way, which I think is why Dr. Ross was successful.
I think this case may have turned out differently if (1) Dr. Ross had not been asked to get these employees back, OR (2) the Court would have found there was any insolence present. If insolence were present, I think the just cause argument would have been quite strong.
This case will also serve as a reminder to employers that if they want the benefit of changes to employment contracts, they must tread very carefully. If the contract refers to consideration that is not ultimately provided, there is significant risk that it will not be enforced.
Bow River Law provides these regular legal blog articles for the purposes of legal news, education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
