In addition to a salary or wages, many employees also enjoy participation in benefits or compensation programs offered by their employers as a term of their employment. Plans may include perks such as performance bonuses, stock options, medical benefits, and other benefits. What happens, however, when a company is sold, and the existing compensation plan is terminated?
A recent decision from the Alberta Court of Appeal dealt with the certification of a class action against two companies, one of which was acquired by the other but retained the same employees. The employees advanced a claim based on breach of contract, claiming unjust enrichment against both companies.
Apache Corporation withdraws from its Canadian operations
In Flesch v. Apache Corporation, the issue began when Apache Corporation (“Apache”), a Texas-based oil and gas company, announced that it would withdraw from Canadian operations in 2017. The company sold its shares to Paramount Resources Ltd (“Paramount”). Paramount continued to employ 347 former employees of Apache. Most employees maintained similar job titles and responsibilities and received the same salaries.
Apache had many employees who participated in their long-term compensation plan. Apache told those employees that their performance awards, stock options and other benefits under the plan would be terminated, but they could participate in Paramount’s share options. The employees claimed that Paramount’s share options did not compare to Apache’s awards. The employees who were impacted by this decision filed a proposed class action lawsuit against both Paramount and Apache on the basis of breach of contract and unjust enrichment.
Class action certification appealed
Justice Poelman of the Court of Queen’s Bench (as it was then) certified the class action against Apache and Paramount. Paramount appealed the certification of the class action decision.
While the focus of the Alberta Court of Appeal’s decision was determining whether the chambers judge erred in certifying the class action, the Court provided commentary and guidance on the issues of breach of contract and unjust enrichment.
Both companies argued they were not common employers of the affected employees
Both Apache and Paramount claimed there was no basis on which to conclude they were considered common employers of the employees who commenced the class action. The parties argued that the companies did not coordinate their activities and that one was a subsidiary of the other; therefore, they did not share common ownership, responsibility or liability.
Justice Slatter held that the chambers judge did not err in finding or certifying common issues based on a contractual relationship between Paramount and Apache. In its analysis, the Court evaluated the self-conflicting terms of the Apache compensation plan. It also considered the evidence provided by the employees which spoke to the close relationship and overlap between the parties regarding the plan and compensation and supported action against both companies.
Employers claim that unjust enrichment offers “no residual benefit” to class members
Again, Paramount and Apache argued that the employees’ claim for unjust enrichment did not offer the class action members a residual benefit and, therefore, should not be certified. If the Court found that the employment contracts had been breached, the employees would benefit from a complete remedy in contract law. Further, if the contracts were determined not to have been breached, Apache would have a juristic reason for their argument.
Justice Slatter highlighted that a claim for unjust enrichment requires the defendant to be enriched while the plaintiff experienced a corresponding deprivation, and both the enrichment and deprivation occurred absent any juristic reason.
The Court noted that the chambers judge held that a certification application was not the appropriate time to decide an unjust enrichment claim. However, Justice Poelman found that this claim did not directly overlap with the breach of contract claim; therefore, there was potential for additional remedies to be made available to the employees.
Court of Appeal strikes unjust enrichment claim
The Court of Appeal found that the claim for unjust enrichment had no reasonable possibility of success and overturned the chamber judge’s certification of unjust enrichment as a common issue to the class action proceeding.
Justice Slatter held that whether or not the class action members are successful in their contract claims, they will have received all of the compensation to which they are entitled, and the test for unjust enrichment would not be met. The Court ultimately found the issue of unjust enrichment to be a “hollow cause of action.”
Contact the Experienced Litigation Lawyers at DBH Law in Calgary for Assistance with Employment Disputes and Corporate Law Matters
The trusted litigation lawyers at DBH Law in Calgary assist clients involved in a variety of employment disputes which can occur due to a breach of their employment agreement, or the acquisition of their employer by another company. Our firm understands the complexities that may arise concerning employment matters in the oil and gas industry, particularly when multiple corporations and international parties are involved. We have the resources to work quickly and the tools to react appropriately to the uncertainties involved in complex litigation disputes. Contact us online or call us at 403-252-9937 to schedule a consultation with a member of our litigation team.