David Smith was hired by Discount Farm Machinery Ltd. as a Heavy-Duty Mechanic on March 1, 2018 after his brother, Gerald, convinced the owner that his younger brother David was an excellent heavy-duty mechanic. David earned $40 an hour and worked a 40-hour week (earning approximately $6400 a month). David also earned about $15,000 a year in overtime pay. The employment contract was in writing and contained a non-competition clause, a non-solicitation clause, and a confidentiality clause. The employment contract provided that if his employment was terminated for just cause, he would not receive any pay in lieu of notice. It further stated that, if he was terminated for any other reason, he would receive his salary for the notice period required by the Employment Standards Act.

On February 3, 2020 David Smith was involved in an altercation with another player in a recreational hockey league. The owner of Discount Farm Machinery Ltd. wants to terminate Davids employment for cause. David worked as a heavy-duty mechanic since March 2018. His performance reviews indicate he performed well at his work. However, he was given a reprimand one year ago along with 5 other employees for drinking beer on the premises. It was on a Friday after their shift ended for the day. One of the other employees was the charge hand at the time.

Discount Farm Machinery Ltd. sponsors the hockey team in a recreational league that David plays for. David got involved in an altercation with a player from the other team and was given a penalty. At the time, he was overheard making a racial slur directed at that player who responded with a similar racial slur. After the game was over, players from both teams went to the bar. The dispute between David and the other player continued and David got into a fight with the other player. Both players made racial slurs directed at each other. Both players were charged with assault. David is due to appear in court in 2 months time. David is 32 years old and he is currently going through marital problems.

The owner of Discount Farm Machinery Ltd. was very upset. He fears that the racial slur may have a negative impact on his business. David and the owner met on February 5, 2020 and the discussion became very heated. The owner told David he had just cause to dismiss him. The owner then accused David of plotting with his brother to leave the company and planning to take confidential property with him (e.g. client lists). The owner then told David that he accepted his resignation and he demanded that David leave the premises immediately. David did not offer a resignation. When David objected, security was called and David was escorted off of the premises

in front of his co-workers. As his left, the owner yelled at David calling him insubordinate and a thief.

On February 15, 2020 the employer mailed Davids record of employment and salary to him.

On February 20, 2020 Davids solicitor wrote to the employer stating that David had been wrongfully dismissed and demanded a years salary plus punitive and moral damages. The employer refused the demand.

A day later, the solicitor for the employer wrote to Davids solicitor stating that he had discussed the matter with the owner of the Company (the owner had delayed contacting his lawyer) and the owner had instructed him to offer David 3 months working notice but that David was required to return to work. David rejected the proposal and refused to return to work.

On March 1, 2020 David moved to Edmonton, Alberta. On March 15, 2020 David incorporated a company in Alberta called Progressive Equipment Sales Ltd. To do so, David borrowed a large amount of money from his brother Gerald. In 2019 Gerald and David had general discussions about leaving Discount Farm Machinery to form their own company and they intended to sell heavy duty machinery to the gas and oil industry. They proposed that the company be based out of Edmonton, Alberta and figured they could access customers in Alberta, Saskatchewan, and northern B.C. The discussions were informal, and no steps were taken to start this new business.

Progressive Equipment Sales Ltd. was not able to pay David any money for the months of April, May, June, July, and August as the business was starting up. In September, the company paid David $2500 a month for the remainder of 2020. It became very successful after that and, in 2021, David was earning $2000 a month more than what he was earning at Discount Farm Machinery Ltd.

Your employer has asked you to do the following:

1) Provide him with an opinion as to whether Discount Farm Machinery Ltd. had just cause to dismiss David Smith. Properly analyze this issue from a legal perspective. Refer to case law and statute law when appropriate. Your answer should include the following:

What conduct might amount to just cause?

What factors would the court consider in its analysis?

Your opinion as to whether just cause exists.

Unfortunately, the termination was messy. Assuming you have just cause, explain to your boss how you would have carried out the termination, including what would have been included in the termination letter. Note: it is not necessary to actually write the termination letter for this assignment. In this section, fully explain how the termination should have bee carried out. (4 marks)

3) Provide your employer with an opinion assuming just cause cannot be established

Your discussion should include:

Can Discount Farm Machinery Ltd. rely on the employment contract dealing with notice? Why or why not?

What is the extent of liability facing Discount Farm Machinery Ltd.? Fully discuss.

What advice would you give to minimize the companys exposure in this case?

Has David sufficiently mitigated his loss?

What are the likely costs of proceeding to court?

What settlement offer might you make and what is the basis for this number?