There’s a new warning for employers in regulated industries coming out of Ontario courts: if you fire an executive that has flagged compliance concerns, even if it is only one of various reasons, damages to that employee could be owing.
And it could cost an employer millions of dollars.
This was the case for Ian McPherson, hired on as CEO and ‘Ultimate Designated Person’ or UDE at Global Growth Assets Inc. in August 2018. As of April 1, 2019, McPherson’s salary would have been $240,000 and he would have been eligible for $160,000 in discretionary bonus.
McPherson was hired after Global was sanctioned several times by the Ontario Securities Commission and ordered Global to replace the previous CEO.
The new CEO’s primary task was to bring Global into compliance with Ontario securities law. To do this, he was required to supervise the activities of Global directed towards ensuring compliance with securities legislation and promote compliance by Global and individuals acting on its behalf.
When McPherson started seeking out conversations with board members about the founder’s family meddling in company operations, his requests were either ignored or denied.
On Feb. 28, 2019, the board terminated McPherson’s employment on a ‘without cause’ basis.
McPherson commenced an action alleging that he was terminated because he expressed concerns regarding Global’s violations of Ontario securities laws. Specifically, McPherson relied on a provision of the Ontario Securities Act, which provides employees with protection from reprisal for speaking up and raising compliance concerns.
Employer claimed he was fired forpoor performance
At trial, Global representatives gave evidence that they did not fire McPherson because he raised compliance concerns. They testified they fired him solely because of poor performance. Citing a woeful lack of production to corroborate these claims, Justice Centa of the Superior Court did not accept this claim.
Instead, Justice Centa found that Global breached the Ontario Securities Act when it terminated McPherson, finding he had a reasonable belief that Global engaged in conduct that violated Ontario securities law. He also repeatedly raised these concerns to his employer. The court found that Global’s decision to terminate McPherson was a reprisal contrary to the Act.
Where things get interesting is how damages flowing from a reprisal are calculated under the Ontario Securities Act. Given that reprisal was found, Mcpherson was entitled to a heightened level of damages, well beyond the notional cap of two years of pay in wrongful dismissal claims.
Securities legislation provides that employees who have been reprised against are entitled to a payment of two times the amount of remuneration he would have bene paid had the contravention not taken place between the date of the contravention (in this case the termination) and the date of the judgment.
Accordingly, the court awarded Mr. McPherson $5,379,808.22 in damages including a payment of two times the sum of his salary and bonus calculated from the day of his termination to the date of the court judgment. Notably, McPherson’s award was not subject to mitigation, meaning, even if he got a job during the claimed period, his award would not be set off against those earnings.
Uprecedented decision changes the stakes
This unprecedented decision changes the stakes. Whistleblower reprisals are no longer just bad optics, they could be financial grenades.
For employers, the lesson is simple: employees who raise compliance concerns are often protected by legislation you may not be aware of – and the protections may be sweeping.
For executives who refuse to look the other way, this case sends a clear signal. Doing the right thing shouldn’t end a career. If it does, Ontario’s courts can and will right the ship, with major financial awards.
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The content of this article is general information only and is not legal advice.
