An electrical engineer at General Electric (GE) Transportation was constructively dismissed after the company was sold and acquired by Wabtec, the Court of King’s Bench of Manitoba has ruled.
But the court also found the engineer, B.B., failed to mitigate his damages by declining a comparable job offer from Wabtec.
Case background
B.B., a respected engineer in railway controls, had founded Iders Inc., a company specializing in electronic design and manufacturing for the rail industry. In 2016, GE Transportation acquired Iders, leading B.B. to sign several agreements, including an Employment Agreement and a Retention Bonus Agreement.
When GE Transportation was sold to Wabtec in 2019, he was offered a position at Wabtec on substantially similar terms. However, he declined the offer, fearing it would void his retention bonus.
B.B.’s concerns centered on his rights under the Retention Bonus Agreement and the Restrictive Covenant Agreement. He worried that accepting Wabtec’s offer would be seen as voluntarily leaving GE Transportation, disqualifying him from the retention bonus and potentially breaching the non-competition clause in his restrictive covenant.
Court’s findings
Justice Bock found that B.B.’s employment with GE Transportation was involuntarily terminated as a result of the sale to Wabtec.
“By operation of law, (his) employment was constructively terminated by the sale of GE Transportation to Wabtec. From (B.B.’s) perspective, the termination of his employment with GE Transportation was involuntary,” stated Bock.
Despite this, the court ruled that he did not act reasonably to mitigate his damages by declining the job offer from Wabtec.
The employment offered by Wabtec was not only comparable but practically identical to his role at GE Transportation. The court noted, “(B.B.) acted unreasonably when he refused Wabtec’s employment offer and therefore failed in his duty to mitigate his damages.”
Retention bonus and VIC bonus
The court granted B.B. a pro-rated retention bonus of $133,000, concluding that his dismissal was involuntary and thus entitling him to the bonus.
“Clause 6 of the Retention Bonus Agreement explicitly provides that if (his) ‘employment involuntarily terminates for any reason other than cause’, he would ‘be paid a prorated portion of the bonus’,” Justice Bock explained.
However, B.B.’s claim for a $60,000 VIC bonus for 2018 was denied. The court held that the bonus was conditional on his acceptance of Wabtec’s employment offer, which he declined.
“(B.B.) failed to meet that condition when he turned down the offer,” the ruling stated.
Mitigation of damages
The court stressed the importance of B.B.’s duty to mitigate his losses by accepting comparable employment.
GE Transportation successfully argued that the decision to decline Wabtec’s offer was unreasonable. The court noted that had B.B. accepted the offer, he would have avoided all the damages he now claims.
The court also dismissed B.B.’s concerns about the Restrictive Covenant Agreement, stating there was no reasonable basis for his interpretation that it would prevent him from working for Wabtec.
Conclusion
In summary, the court ruled that B.B. was wrongfully dismissed without reasonable notice by GE Transportation due to the sale to Wabtec but failed to mitigate his damages by not accepting the job offer from Wabtec.
As a result, while he was awarded a pro-rated retention bonus, he was not entitled to the VIC bonus. The court awarded him $896,640.84 in total damages, considering his failure to mitigate.
For more information, see Brown v. General Electric Canada et al., 2024 MBKB 95 (CanLII).
