CITATION: Chen v. Purdue Pharma Inc., 2015 ONSC 1967
Court file no. 86937/14
Date: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DANNY CHEN
Plaintiff
– and –
PURDUE PHARMA, by its general partner Purdue Pharma Inc.
Defendant
David Greenwood, for the plaintiff
Stephanie Brown, for the defendant
HEARD: September 9, 2014
Bale J.
Overview
[1] Danny Chen was employed by Purdue Pharma for 22½ years. Purdue is a manufacturer of pharmaceuticals. Chen’s employment was terminated, without cause, in October of 2013.
[2] Chen now moves for summary judgment on his claim for wrongful dismissal. Purdue does not oppose the granting of summary judgment, but the damages to which Chen is entitled are in issue.
[3] The issues to be determined are as follows:
• the period of reasonable notice;
• whether Chen is entitled to increases to his base salary during the notice period;
• the calculation of bonus for the notice period; and
• the approach to be taken to earnings, if any, during the post-judgment balance of the notice period.
[4] An affidavit sworn by Chen was filed in support of the motion. Chen was cross-examined on the affidavit, and a transcript of the evidence given on the examination was filed. No additional evidence was filed upon behalf of Purdue.
Analysis
Period of reasonable notice
[5] The Bardal approach remains the approach courts must take to determine what constitutes reasonable notice of termination: Arnone v. Best Theratronics Ltd., 2015 ONCA 63, at para. 16. The factors to be considered include, but are not limited to: the age of the employee; the length of service; the character of the employment; and the availability of similar employment, having regard to the experience, training and qualifications of the employee.
[6] As of the date his employment was terminated, Chen was 56 years of age, and had been employed by Purdue for 22½ years. He held the position of “Director of Business Development”. He described his position to be a senior one, carrying significant responsibility. He was responsible for product acquisitions and divestments, in and out licencing of products and patents, identifying and evaluating new product development opportunities, negotiating agreements with other drug manufacturers, and assisting with patent infringement cases. With respect to the availability of similar employment, he said that his position was highly specialized, and that there are limited comparable employment opportunities in the Toronto area. He said that because of the time and expense involved in drug development, most equivalent positions are located in the larger markets of the United States or Europe.
[7] Purdue argues that Chen’s position was not senior, and did not require him to exercise a significant degree of managerial responsibility. Counsel based the argument on a number of factors. She says that Chen was “down the ladder” because: there were two people above him (the president and the head of marketing), but only one person reported to him; he had no decision-making authority; he had no authority to hire or fire other employees; he had no budgetary responsibility; and, he had no authority to deviate from company policies. I reject the argument for the following reasons.
[8] With only two people above him, at a major pharmaceutical company, one would have thought that Chen was pretty close to the top of the ladder. The fact that only one person reported to him is meaningless, in the absence of any evidence as to how many others were employed by the company, and in what positions. Chen’s position, by its very nature, was closely tied to the success of the company. His time was spent doing, rather than supervising others. Although the president or board of directors had final decision-making authority over product acquisitions and licencing, Chen was the head of the team responsible for making acquisitions and licencing recommendations. While he didn’t have final say over hiring or firing, his recommendations with respect to hiring were always accepted, and he never felt the need to fire anyone. He had no budgetary responsibility, but that was because acquisitions and licencing were not carried out on the basis of a budget. He didn’t have authority to deviate from company policies, but then again, it was he who had established the policies and procedures for business development. I also note that in a report entitled “Purdue Pharma Bonus Historical Information”, Chen’s position was described as “Senior Management”.
[9] Based upon Chen’s age, the length of his service, the importance of his role, and the limited availability of similar employment, reasonable notice in this case would have been 24 months. Such notice accords with the analysis of the Court of Appeal for Ontario in Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14, at paras. 11ff.
Whether Chen is entitled to increases to his base salary during the notice period
[10] Where salary increases have been made on a yearly basis, they may become part of an employee’s total compensation package, in which case the employee is entitled to the increases that would have been received during the notice period: Turner v. Canadian Admiral Corp. (1980), 1 C.C.E.L. 130 (Ont. H.C.J.); Yerramilli v. Atomic Energy of Canada Ltd. (1990), 34 C.C.E.L. 259 (Ont. Gen. Div.). Purdue relies upon Koor v. Metropolitan Trust Co. of Canada (1993), 48 C.C.E.L. 216 (Ont. Gen. Div.), a case where the damages awarded did not include salary increases; however, in that case, there was no evidence to support the argument that salary increases had become part of the employee’s compensation package.
[11] In the present case, Chen received salary increases between 2.5 and 5 per cent per year between 2009 and 2013. In his affidavit, he said that it was his belief that others holding comparable positions obtained 2014 salary increases between 2 and 3 per cent, and that he believed that he would have received a comparable increase had his employment not been terminated. Although Chen did not state the source of his belief, in the absence both of cross-examination on the point, and any evidence from Purdue as to actual 2014 salary increases, I find that he would have received an increase of at least 2 per cent.
Calculation of bonus for the notice period
[12] Chen claims a bonus for the notice period based upon an average of those he received in 2011 and 2012. Purdue argues that the notice period bonus should be based upon the average of the bonuses paid to Chen for the years 2010, 2011 and 2012, as a more representative average, and relies upon the decision of the motion judge in Poole v. Whirlpool Corp., 2011 ONSC 4100. However, in that case, on appeal (2011 ONCA 808, at para. 7), the court noted that the motion judge had accepted the plaintiff’s position with respect to the calculation of bonus, and that it was open to her to do so because “there was a paucity of evidence before the motion judge on some of the key components of the formula said by [Whirlpool] to govern the calculation of the bonus.”
[13] In the present case, Purdue did not disclose the bonuses paid to other employees for 2013, or provide any evidence as to how Chen’s bonus would have been calculated had his employment not been terminated. In fact, in the bonus report referred to earlier, Purdue blacked out the 2013 bonuses received by the two other employees included in the report. The same report refers to a formula for the calculation of bonus, but the information necessary to calculate the bonus was not disclosed. In these circumstances, and for the reasons given by the Court of Appeal in Poole, I accept Chen’s position as to the appropriate method for the calculation of bonus.
Approach to be taken to earnings, if any, during the post-judgment balance of the notice period
[14] Purdue argues that if I determine a period of reasonable notice that extends beyond the date of judgment, the damages awarded should be discounted to account for the possibility that Chen will be re-employed during the balance of the notice period. Alternatively, Purdue argues that an amount representing the damages referable to the post-judgment period should be held in trust by Chen’s solicitors; and, in the event that he is re-employed before the expiry of the notice period, that an appropriate refund be made to Purdue.
[15] In the circumstances of this case, I prefer the approach to post-judgment earnings followed in Correa v. Dow Jones Markets Canada Inc. (1997), 1997 CanLII 12268 (ON SC), 35 O.R. (3d) 126, at p. 9. In that case, Sanderson J., following a survey of a number of approaches to the issue, ordered that any money earned by the plaintiff during the notice period be impressed with a trust, and be paid over to the defendant upon the expiry of the notice period.
[16] Although I am unaware of any Ontario cases at the appellate level where this issue has been specifically addressed, support for this approach may be found in Cronk v. Canadian General Insurance Co. (1995), 1995 CanLII 814 (ON CA), 25 O.R. (3d) 505 (C.A.), at para. 13, where the court confirmed that a dismissed employee remains accountable to the employer for income earned, if any, during chrthe post-judgment notice period.
Disposition
[17] For the reasons given, the plaintiff is entitled to judgment in the sum of $457,616.17, as detailed in the summary provided by counsel on the hearing of the motion. Any employment income received by the plaintiff during the post-judgment notice period will be held by the plaintiff in trust, and be paid over to the defendant upon the expiry of the notice period. In addition, as agreed to by the parties, the defendant will continue to make contributions to the plaintiff’s pension plan, in the amounts required to allow him to retire at the end of the notice period, with an unreduced pension.
[18] Delivery of these reasons has been delayed as a result of a long trial in which I became engaged following the hearing of the motion for judgment. As a result, the defendant is entitled to know whether the plaintiff has found employment during the intervening period. If the plaintiff has received employment income during that period, and the parties are unable to agree as to the effect of same on the judgment, I may be spoken to.
[19] If the parties are unable to agree on costs, I will consider brief written argument provided that it is delivered to Judges Reception, at the Durham Region Courthouse, no later than May 4, 2015.
“Bale J.”
Released: March 25, 2015
CITATION: Chen v. Purdue Pharma Inc., 2015 ONSC 1967
Court file no. 86937/14
Date: 20150325
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
DANNY CHEN
Plaintiff
– and –
PURDUE PHARMA, by its general partner Purdue Pharma Inc.
Defendant
REASONS FOR JUDGMENT
Bale J.
Released: March 25, 2015