ABCA Contemplates Enhanced Gatekeeping in Employee Compensation Class Action Certification

Specific thanks to Brendan O’Grady (a senior affiliate in our Litigation & Govt Enforcement Follow Group) and Anton Rizor (articling pupil in our Toronto office environment) for co-authoring this blog.

In Flesch v Apache Company, the Alberta Court docket of Attractiveness (“ABCA”) upheld the certification of an staff class action arising out of the cancellation of long-phrase incentive payment prepare. This case is considerable for the reason that the courtroom discussed its gatekeeping function in the certification of class steps, and it serves as a warning to companies who search for to amend or cancel incentive designs.  

In July 2017, the Apache Company (“Apache”), an American oil and fuel firm, declared the closure of its Canadian operations. By way of a sequence of amalgamations, Apache’s Canadian subsidiary, Apache Canada, was bought to the firm that grew to become Paramount Methods (“Paramount”). Apache cancelled all awards under its lengthy-time period payment prepare, together with limited inventory models, stock possibilities, and effectiveness awards. Apache suggested the more than 300 transferred personnel that they would participate in Paramount’s compensation strategy.

The workforce alleged that Paramount’s program was much less remunerative. They claimed damages for breach of agreement, breach of obligation of fantastic religion, breach of fiduciary responsibility, and unjust enrichment.

The chambers choose granted the staff group’s application for class action certification towards Apache, Paramount, and person board customers. They appealed specific facets of the certification.

The greater part of the ABCA upheld the certification, affirming the chambers judge’s reasoning on most grounds. It rejected the appellant’s argument that there was no basis in fact to conclude that they were widespread companies mainly because they were being subsidiaries or affiliate marketers. The court also turned down Paramount’s argument that they ought to not be integrated as a defendant due to the fact Apache could be held liable.

The ABCA overturned the certification of the unjust enrichment claim as a prevalent situation since it had no fair prospect of accomplishment.

A single aspect of the take a look at for certification is no matter if the pleadings disclose a bring about of action. The prerequisite has a reduced bar than the other features. It will be happy until, assuming the information are legitimate as pleaded, it is “plain and obvious” that the declare can not triumph. The vast majority applied this standard examination.

In a concurring determination, Justice Slatter held that the court docket need to exercising a much more robust gatekeeping function at certification. He noted that “cluttering up course motion proceedings with collateral and marginally relevant brings about of action” does not provide the aims of Alberta’s course action regime. As a substitute, mirroring the Federal Courtroom Procedures and jurisprudence, Justice Slatter held that the court docket need to increase the normal to require “pleadings to disclose a reasonable induce of action.” He envisioned that the court would implement a generous check to the key cause of motion and the far more rigid regular to secondary results in of motion.

• Justice Slatter recommended an enhanced gatekeeping purpose for courts for certifying class steps. Though Justice Slatter concurred in the final result, his reasoning was not element of the majority selection, so it’s not distinct to what extent his opinions will effect future decisions. It will be fascinating to see no matter if other courts adhere to his suggestion.
• Businesses require to be informed of the chance of class proceedings associated with revising or cancelling incentive payment packages. This is specifically significant in the context of workforce transitions.
• A successor corporation may perhaps not be shielded from course proceedings dependent on the conduct of prior businesses.
• Businesses and their administrators have to have to be informed that class proceedings can be accredited against particular person administrators of incentive plans for breach of fiduciary responsibility.