In Lischuk v K-Jay Electric Ltd, 2025 ABKB 460 Justice Angotti had a situation where the dismissed employee was also a shareholder in a private company.
Under the Unanimous Shareholder Agreement, he was required to sell his shares to the Company immediately upon his termination based on the value that day. This was done and upheld under an arbitration award.
All the shareholders were also employees. The parties had set up a system whereby the shareholder/employees were paid both by salary and dividends .
The issue was whether the Plaintifff was entitled to the dividends he would have received had he been employed over the 26 month notice period.
In Ontario, the case of Mikelsteins v Morrison Herschfield Limited, 2021 ONCA 1555 stands for the proposition that when dealing with the issue of interpreting corporate documents you do not apply the principles of employment contract interpretation. Therefore where the shareholders agreement says that your rights end upon the termination of employment , that means the day you receive notice of termination. However applying a employment law analysis this same language would be read as if is said upon the date of the lawful termination of employment, which is at the end of the notice period.
The Alberta Court clearly rejected this interpretation:
[71] In my respectful view, this is not consistent with either the law in Alberta or the Supreme Court’s direction in Matthews as to the legal characterization of when employment terminates and the appropriate analysis to consider an employee shareholder’s claims. I disagree that an individual shareholder, whose ability to hold shares is tied to their employment in any fashion, can be dealt with simply as a corporate law matter. This places the interests of the corporate employer above those of the employee, which is not consistent with the balance between employees and employers established over decades of employment law, a balance that is maintained by the required analysis set out in Matthews. Therefore, I decline to follow the Ontario line of cases.
As a result the Plaintiff received $948,000 for this issue alone.
Under the Unanimous Shareholder Agreement, he was required to sell his shares to the Company immediately upon his termination based on the value that day. This was done and upheld under an arbitration award.
All the shareholders were also employees. The parties had set up a system whereby the shareholder/employees were paid both by salary and dividends .
The issue was whether the Plaintifff was entitled to the dividends he would have received had he been employed over the 26 month notice period.
In Ontario, the case of Mikelsteins v Morrison Herschfield Limited, 2021 ONCA 1555 stands for the proposition that when dealing with the issue of interpreting corporate documents you do not apply the principles of employment contract interpretation. Therefore where the shareholders agreement says that your rights end upon the termination of employment , that means the day you receive notice of termination. However applying a employment law analysis this same language would be read as if is said upon the date of the lawful termination of employment, which is at the end of the notice period.
The Alberta Court clearly rejected this interpretation:
[71] In my respectful view, this is not consistent with either the law in Alberta or the Supreme Court’s direction in Matthews as to the legal characterization of when employment terminates and the appropriate analysis to consider an employee shareholder’s claims. I disagree that an individual shareholder, whose ability to hold shares is tied to their employment in any fashion, can be dealt with simply as a corporate law matter. This places the interests of the corporate employer above those of the employee, which is not consistent with the balance between employees and employers established over decades of employment law, a balance that is maintained by the required analysis set out in Matthews. Therefore, I decline to follow the Ontario line of cases.
As a result the Plaintiff received $948,000 for this issue alone.
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