The Alberta Court of King’s Bench recently released its decision in Lischuk v. K-Jay Electric Ltd., a significant wrongful dismissal case involving a long-term senior employee and shareholder of an Edmonton-based electrical contracting company. The court awarded the plaintiff employee more than $1.5 million in damages following his termination without cause, finding that his circumstances justified a notice period beyond the traditional 24-month ceiling.

Employee Worked for Company For Nearly Four Decades

The employee devoted nearly his entire career to the employer, K-Jay Electric Ltd., beginning as a helper in 1978 and working up to become General Manager in 2008. Along the way, he became a part-owner of the company, holding a 20% equity stake through his corporation, 997878 Alberta Ltd.

The employer was founded in 1973 by John Bakker and grew to become one of Edmonton’s leading electrical contractors. In 2013, as John Bakker transitioned leadership to his son Mark, changes in management style and business direction led to the employee’s termination without cause. At the time, he was earning a base salary and bonus of $254,000, plus benefits.

Following his dismissal, disputes arose over his severance entitlements, vacation pay, bonus participation, and the valuation of his company shares. The court was tasked with resolving several complex issues at trial.

Employer Owed Six Weeks of Vacation Pay

One preliminary issue concerned whether the employee was owed vacation pay for earned but untaken time. Although the employer lacked written vacation policies and records, the court accepted the employee’s evidence that he was entitled to eight weeks of vacation annually and had only taken two in 2013.

The court ruled that under Alberta’s Employment Standards Code, employers must compensate for vacation earned but not taken upon termination. As such, the employer owed $29,308 for six weeks of vacation pay.

Reasonable Notice Period Extended Past 24-Month Ceiling

A central question was the length of the employee’s reasonable notice period. The Bardal factors (character of employment, length of service, age, and availability of comparable employment) guided the analysis.

The employer acknowledged that 24 months of notice was appropriate, the traditional “upper limit” in Alberta. The employee, however, sought 26 months, citing exceptional circumstances. He was 58 years old, had spent 34 years with one employer, and his termination was effectively treated as a forced retirement.

The court agreed, noting that while 24 months is often considered the ceiling, exceptional cases can warrant more. The court found that the employee’s long service, senior position, specialized skills, and limited re-employment prospects combined to create such circumstances. Accordingly, the court awarded a 26-month notice period. This is the first Alberta case to go beyond the 24-month guideline.

No Reduction for Failure to Mitigate Damages

In wrongful dismissal claims, employees have a duty to mitigate their losses by seeking comparable employment. However, the employer bears the burden of proving both that the employee failed to make reasonable efforts and that suitable positions were available.

The employee admitted that he did not pursue new employment. He argued that his age, long service with a single employer, and the employer’s rationale for his termination (an “old school mentality”) left him with few realistic prospects. The employer countered that he had valuable industry experience and that the electrical sector was strong at the time.

The court emphasized that the burden remained with the employer. Since the employer produced no evidence of comparable job opportunities, the court held that the employee’s damages would not be reduced for failure to mitigate.

Bonus Entitlements During the Notice Period

A major dispute involved whether the employee was entitled to participate in the employer’s annual bonus pool during his notice period. The company had a longstanding practice of distributing profits to shareholder-employees in the form of taxable bonuses, separate from dividends.

Applying the Supreme Court’s framework in Matthews v Ocean Nutrition Canada Ltd., the court asked two questions:

1. But for the termination, would the employee have received the bonus?
2. Did the relevant contract unambiguously remove that entitlement?

The evidence showed that the employee consistently received substantial bonuses, averaging more than $160,000 annually, linked to his employment, not merely his shareholdings. The Unanimous Shareholders Agreement (USA) did not explicitly limit these rights. Accordingly, the court held that he was entitled to bonus damages during the 26-month notice period.

Claim for Increased Share Value

While the employee succeeded in his bonus claim, he was not awarded damages for the increased value of 997’s shares during the notice period. The court distinguished between his rights as an employee and the corporation’s rights as a shareholder. Since 997 was the legal owner of the shares and had already pursued a valuation claim unsuccessfully, the employee could not relitigate the issue personally.

The court rejected arguments to pierce the corporate veil, emphasizing that 997 and the employee were separate legal entities. As such, his claim for damages tied to share value appreciation was dismissed.

Calculating Bonus Damages

The court then turned to how damages for lost bonuses should be quantified. Three approaches were considered:

1. Using historical averages;
2. Applying the pre-termination formula; or
3. Projecting based on the company’s post-termination bonus practices.

The court adopted a blended approach, reflecting both historical entitlements and subsequent changes in the company’s bonus structure. Adjustments were made for certain extraordinary payments, such as funds allocated to buy out John Bakker’s shares. Ultimately, the court determined that the employee should receive a total of bonus damages of $948,626.

Landmark Final Damages Award Granted

In total, the court awarded Mr. Lischuk:

• $29,308 in vacation pay;
• $553,895.33 in salary, Christmas bonus, and benefits; and
• $948,626 in annual bonuses.

This amounted to $1,531,829.33, plus pre- and post-judgment interest, subject to applicable tax withholdings. The court left the parties 45 days to address costs and any arithmetic corrections.

Key Takeaways for Employers and Employees

This case highlights several important lessons in Alberta employment law:

Exceptional Circumstances Can Justify Notice Periods Beyond 24 Months

Although rare, Alberta courts may award more than the traditional “rough upper limit” when an employee’s age, length of service, and circumstances resemble a forced retirement.

Employers Bear the Burden of Proving a Failure to Mitigate

Even if a terminated employee makes no effort to find new work, the employer must provide evidence of available comparable jobs. Without such proof, damages will not be reduced.

Bonuses Tied to Employment Remain Part of Compensation

Where bonuses are consistently paid and treated as employment income, they may form part of wrongful dismissal damages unless the contract clearly excludes them.

Shareholder Rights and Employment Rights Are Distinct

A corporation’s rights under a shareholder agreement cannot be conflated with an employee’s common law entitlements. Attempts to pierce the corporate veil will be closely scrutinized.

Courts Take a Pragmatic Approach to Bonus Calculations

Rather than rigidly applying past formulas, courts may blend historical data with post-termination practices to reflect what the employee would likely have received.

A Critical Decision in Alberta Employment Law

The decision in Lischuk v. K-Jay Electric Ltd. is a landmark Alberta wrongful dismissal case, both for extending reasonable notice beyond 24 months and for its detailed analysis of bonus entitlements tied to shareholder status. Employers should carefully review their employment contracts an-d shareholder agreements to ensure clarity around termination, bonuses, and equity. Employees, particularly long-serving senior managers with ownership stakes, can look to this decision as an example of how courts may protect their rights when dismissed without cause.

As Alberta’s labour market continues to evolve, this ruling underscores the importance of fair treatment and transparency in employment relationships, especially for employees who have dedicated their careers to building a company’s success.

Contact Getz Collins and Associates in Calgary for Dynamic Employment Law Services

If you are an employer or employee and are facing a complex dispute over wrongful dismissal, severance, bonuses, or other entitlements, it is critical to understand your legal rights. The decision in Lischuk v. K-Jay Electric Ltd. shows how Alberta courts may go beyond traditional limits to ensure fair treatment of long-serving employees. The talented employment lawyers at Getz Collins and Associates can help you assess your options, protect your rights, and pursue the remedies you deserve. Contact us today at (587) 391-5600 or reach out online to discuss your employment law matter.