ABCA Contemplates Enhanced Gatekeeping in Employee Compensation Class Action Certification
Helen Saulnier 
Particular thanks to Brendan O’Grady (a senior associate in our Litigation & Authorities Enforcement Exercise Group) and Anton Rizor (articling pupil in our Toronto workplace) for co-authoring this web site.
In Flesch v Apache Company, the Alberta Courtroom of Attractiveness (“ABCA”) upheld the certification of an staff class motion arising out of the cancellation of very long-term incentive compensation prepare. This case is considerable because the court docket mentioned its gatekeeping operate in the certification of course actions, and it serves as a warning to companies who search for to amend or terminate incentive ideas.
In July 2017, the Apache Company (“Apache”), an American oil and gas organization, announced the closure of its Canadian functions. As a result of a collection of amalgamations, Apache’s Canadian subsidiary, Apache Canada, was bought to the organization that turned Paramount Resources (“Paramount”). Apache cancelled all awards under its prolonged-time period compensation prepare, which includes limited stock models, stock options, and efficiency awards. Apache recommended the in excess of 300 transferred employees that they would take part in Paramount’s payment program.
The workers alleged that Paramount’s program was significantly less remunerative. They claimed damages for breach of agreement, breach of responsibility of very good religion, breach of fiduciary duty, and unjust enrichment.
The chambers choose granted the personnel group’s application for course motion certification towards Apache, Paramount, and particular person board associates. They appealed specified facets of the certification.
The majority of the ABCA upheld the certification, affirming the chambers judge’s reasoning on most grounds. It turned down the appellant’s argument that there was no basis in reality to conclude that they had been popular companies mainly because they have been subsidiaries or affiliates. The courtroom also rejected Paramount’s argument that they must not be bundled as a defendant simply because Apache could be held liable.
The ABCA overturned the certification of the unjust enrichment declare as a typical issue mainly because it had no affordable prospect of achievements.
One particular component of the examination for certification is whether or not the pleadings disclose a result in of action. The prerequisite has a decrease bar than the other aspects. It will be glad until, assuming the info are legitimate as pleaded, it is “plain and obvious” that the claim are unable to succeed. The majority used this standard examination.
In a concurring decision, Justice Slatter held that the court docket ought to workout a much more strong gatekeeping purpose at certification. He observed that “cluttering up course action proceedings with collateral and marginally related leads to of action” does not provide the targets of Alberta’s class motion routine. Rather, mirroring the Federal Court docket Principles and jurisprudence, Justice Slatter held that the courtroom really should raise the common to call for “pleadings to disclose a acceptable induce of motion.” He envisioned that the court docket would utilize a generous check to the principal trigger of action and the more rigid common to secondary results in of action.
- Justice Slatter suggested an increased gatekeeping perform for courts for certifying course actions. Even though Justice Slatter concurred in the consequence, his reasoning was not element of the the vast majority choice, so it’s not apparent to what extent his responses will effects potential selections. It will be fascinating to see no matter if other courts stick to his recommendation.
- Businesses have to have to be knowledgeable of the chance of class proceedings associated with revising or cancelling incentive compensation packages. This is specially important in the context of workforce transitions.
- A successor enterprise may perhaps not be shielded from course proceedings centered on the conduct of prior employers.
- Employers and their directors will need to be conscious that class proceedings can be qualified from unique administrators of incentive packages for breach of fiduciary duty.
