In a ruling that scrutinizes the treatment of employee share ownership plans in wrongful dismissal damages, the Alberta Court of Appeal has rejected both an appeal and cross-appeal centred on whether a former manager at Spartan Controls could recover lost shareholder profit sharing (SHPS) payments beyond a 90-day window following his termination.
The decision underscores that, while such share-based programs can form part of an employee’s compensation, contractual provisions allowing a buy back of shares on short notice may restrict an employer’s damages obligation.
Background
B.K. was employed by Spartan Controls from November 1997 until he was informed his position was terminated on April 4, 2022.
A summary trial judge concluded he was entitled to a 20-month reasonable notice period and that, in principle, his wrongful dismissal damages should include the base pay, benefits and quarterly bonuses he would have earned during that period. The key legal controversy arose over whether SHPS payments —derived from Spartan Controls’ optional employee share plan — should also be included in those damages.
Participation in the SHPS program required employees to purchase shares in the parent entity, Spartech 1991 Ltd., once they had completed three years of continuous service. These shares helped finance the company’s operations and overall growth, with the board of directors allocating share availability based on job roles.
The returns, described in the ruling as “reflect[ing] a return amount per share,” were paid to participants “as either employment income or as a combination of employment income and dividend income, depending on what was most tax advantageous.” While not all employees opted into the plan, B.K. did, amassing 73,600 shares over several years.
According to the unanimous shareholder agreement (USA) he signed, Spartan Controls had a contractual right to buy back employee-held shares on 90 days’ notice, at any time and for any reason. When B.K. received notice of his termination, the company requested that he return his shares under those provisions. B.K. insisted he was entitled to damages reflecting the SHPS payments he claimed would have accrued throughout the full 20-month notice period. He argued that his common law right to reasonable notice was not clearly removed by the USA.
Spartan Controls, in turn, countered that the SHPS payments stemmed from B.K.’s status as a shareholder, not as an employee, and were therefore not part of the common law analysis on wrongful dismissal damages.
Alternatively, the company pointed to sections 2.4 and 2.6 of the USA, which spelled out its share buy-back rights, as unambiguously restricting any entitlement to those SHPS amounts beyond the specified 90 days.
Clear, enforceable limit
In applying the test from a leading Supreme Court of Canada decision, the summary trial judge asked: first, would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period; and second, did the relevant contract “unambiguously take away or limit that common law right”?
After concluding that the SHPS payouts qualified as employment compensation, the judge found section 2.6 of the USA indeed set a clear, enforceable limit.
“The plain language of the USA enabling the 90-day buy back of shares distinguishes [B.K.’s] case from the cases upon which he relies,” the court said in dismissing B.K.’s appeal. It upheld the finding that Spartan Controls could minimize its damages obligation by exercising its buy-back right, stating the summary trial judge had properly applied the principle that, “where there are several ways in which the contract might be performed, that mode is adopted which is the least profitable to the plaintiff, and the least burthensome to the defendant.”
B.K. advanced multiple grounds for overturning the 90-day limit, among them the assertion that Spartan Controls acted in bad faith and oppressed his reasonable expectations by terminating him and repurchasing the shares to avoid paying the SHPS amounts for the entire 20-month period. The court rejected those arguments, stating there was “no evidence of the type of abusive or unfair conduct required to establish ‘oppressive’ action or bad faith conduct on the part of” the employer. According to the ruling, every employee who participates in the plan sells their shares back on termination, and B.K. had signed the USA recognizing the company’s right to exercise that option.
Further, B.K. contended Spartan Controls never specifically cited section 2.6 of the USA in writing or made a formal election to rely on it at the time of his dismissal. He suggested that the employer’s move to buy back his shares before the notice period ended was invalid.
The court disagreed, emphasizing that B.K. could not overlook the USA’s explicit language, which “unambiguously limited his minimum guaranteed entitlement to SHPS payments to 90 days.” Accepting B.K.’s arguments, the court added, “would render the agreed upon terms of the USA meaningless.”
Cross appeal from employer
The cross-appeal from Spartan Controls centred on whether the SHPS amounts should have been considered a form of employment compensation at all. The company had initially argued that those payments were purely investment returns, but by the time of the hearing, it acknowledged the SHPS program was part of B.K.’s overall employment agreement. The court thus found no reason to interfere with the judge’s conclusion that B.K. could claim SHPS payments in principle if not for the USA’s limiting language.
Ultimately, the court agreed that in calculating damages for wrongful dismissal, the summary trial judge could account for the fact that Spartan Controls was contractually permitted to buy back B.K.’s shares on 90 days’ notice. B.K. received the purchase price for those shares, plus 90 days’ worth of SHPS entitlements. The court confirmed this was a valid application of the concept that “damages for a contractual breach in failing to provide reasonable notice are … to put the wrongfully terminated employee in the position they would have been in had [the employer] complied with its reasonable notice obligation.”
Because the USA endowed Spartan Controls with a clear and “unrestricted right to buy back [B.K.’s] shares at any time upon 90 days’ notice,” damages were limited accordingly.
Both the appeal and the cross-appeal were dismissed. The ruling leaves intact the summary trial decision that B.K. is entitled to lost wages, benefits, and bonuses for the full notice period, while SHPS payments end 90 days after notice is given, aligning with the express terms of the USA.
For more information, see Kirke v Spartan Controls Ltd, 2025 ABCA 40 (CanLII).
