Employees and the Oppression Remedy

April 30, 2021

By Brian Babcock

Terminated employees generally are not “complainants” who are allowed to bring a claim for an oppression remedy under the Ontario Business Corporations Act section 248.

We have written recently on the topic of the oppression remedy, and especially the need to demonstrate “reasonable expectations” which have been ignored.

Before you get to that stage though, the party suing must show that they fit the definition of “complainant” under the Act, which is:

(a) a registered holder or beneficial owner, and a former registered holder or beneficial owner, of a security of a corporation or any of its affiliates,

(b) a director or an officer or a former director or officer of a corporation or of any of its affiliates, or

(c) any other person who, in the discretion of the court, is a proper person to make a s. 248 application.

Most oppression remedy claims joined with an action for damages for wrongful dismissal are made by employees who are also shareholders or directors , under category “a” or “b” of the definition of complainant.

Category “c” is the catch-all under which some non-director, non-officer disgruntled ex-employees try to bring a claim.

Wrongful dismissal by itself will not usually justify an oppression remedy.

The Ontario Court of Appeal, in Abbasbayli v. Fiera Foods Company reviewed the principles that apply in such a situation. Abbasbayli, the ex-employee, included an oppression remedy claim in his action for wrongful dismissal.

In a few cases, oppression remedy claims have been allowed by non-shareholder employees where they allege that a director’s actions prevented the corporate employer from paying wages or damages for wrongful dismissal. Examples of the alleged oppressive acts include where a director diverted assets to a new corporation, putting the employer out of business without paying wages or just before a wrongful dismissal trial; or where the directors diverted funds to their own personal use when faced by a proposed class action by former employees.

In addition, the Statement of Claim must set out facts related to the reasonable expectations that were allegedly violated. To impose personal liability on directors, there must also be oppressive conduct attributed to those individuals.

In Abbasbayli, the ex-employee did not fulfill these requirements in his Statement of Claim, so that part of the claim was struck out. However, he was given permission or leave to amend the claim, and if he can make the proper allegations, the claim will proceed.

If you are a shareholder employee, the oppression remedy may be available to you if the facts justify the claim. However, if you are simply a wrongfully dismissed former employee, we may have to identify particular special facts for the court to allow the claim of oppression to proceed.

If you are an employer or ex-employer, and particularly if you are a director, you should take extra care that in the context of a dismissal or when facing actions for items like unpaid wages, any conduct by you which unfairly disregards the interests of the ex-employee may expose you to personal liability. This is why, in all but the most straightforward dismissals, we suggest getting legal advice early in the process, and consulting us regularly if you end up in a dispute, even before a claim is issued. A few dollars worth of prevention may save many thousands of dollars in costs, and time, not to mention the risk of a judgment against you.