BC Supreme Court decision offers cautions about after-acquired cause and termination clauses for commission-compensated employees.

The BC Supreme Court recently decided a wrongful dismissal case in Hoem v Macquarie Energy Canada Ltd., 2025 BCSC 446, where it awarded damages in lieu of common law reasonable notice and aggravated damages to the successful plaintiff after his former employer alleged after-acquired cause.

Bradley Hoem was employed by Macquarie Energy Canada Ltd. (“Macquarie”) for over 17 years as a salesperson in its equipment finance business. Mr. Hoem was a successful salesperson, earning a base salary of $100,000 and several hundred thousand dollars in commissions annually.

In the fall of 2022, Macquarie learned of a lawsuit Mr. Hoem brought against a former guest at his personal Airbnb (the “Lawsuit”). Following a negative review from the guest, Mr. Hoem sent threatening texts to the guest, which resulted in his removal from Airbnb and another rental program. Mr. Hoem sued the guest for defamation and interference with economic interests.

In November 2022, Macquarie terminated Mr. Hoem’s employment without cause. On termination, Macquarie provided Mr. Hoem with a severance of 52 weeks’ base salary ($100,000) under the termination clause in his employment agreement and payment for accrued hours of vacation pay. At the time, Macquarie explained to Mr. Hoem that his dismissal was due to his negative interactions with internal staff, unresponsiveness to a key client, a conduct notice from September 2021 for a forwarding a confidential document to his spouse’s computer, and potential reputational damage to the Macquarie arising from the Lawsuit.

Mr. Hoem filed a claim against Macquarie with the BC Supreme Court (the “Court”), seeking damages for pay in lieu of reasonable notice, unpaid vacation pay, and aggravated and punitive damages. In Macquarie’s response, it alleged that it found two additional grounds for termination after Mr. Hoem’s employment had been terminated (after-acquired cause). First, Macquarie alleged that Mr. Hoem had been dishonest during the investigation it carried out regarding the Lawsuit. Second, Macquarie found that Mr. Hoem had recorded in personal, time-stamped notes, that he had consumed “gummies” on nearly 50 occasions, which time stamps appeared to coincide with working hours. Macquarie interpreted the word “gummies” to mean cannabis gummies.

The primary issues were whether Macquarie had after-acquired cause to terminate Mr. Hoem’s employment, the enforceability of the termination clause in his employment contract, the appropriate period of reasonable notice, and whether Macquarie breached its duty of good faith and fair dealing.

The Court found that Macquarie did not have after-acquired cause to terminate Mr. Hoem’s employment. While Mr. Hoem’s dishonesty about the text message to his former Airbnb guest “would have warranted disciplinary action”, the Court emphasized that not all dishonesty will justify cause for dismissal.  The Court found this particular dishonesty “did not go to the core of the employment relationship”, so Macquarie did not have after-acquired cause. Mr. Hoem's consumption of gummies also did not amount to after-acquired cause. The Court acknowledged Macquarie's policy on cannabis, which distinguishes between THC (the main psychoactive ingredient in cannabis, which makes a person feel “high”) and CBD (which is not psychoactive), and accepted Mr. Hoem's evidence that he had taken non-psychoactive CBD gummies for health reasons. In other words, Mr. Hoem's consumption did not involve a mind-altering substance (i.e. THC), so did not violate a fundamental duty or policy that would justify termination of his employment.

The Court further found that the termination clause in Mr. Hoem’s employment contract was unenforceable. The clause, which provided for a maximum of up to 52 weeks’ base salary for termination without cause, potentially did not meet or exceed the minimum statutory termination requirements under the Employment Standards Act (the “ESA”).  For example, a very high sales volume in the eight weeks preceding the termination of Mr. Hoem’s employment potentially could result in a minimum ESA pay in lieu of notice entitlement that could exceed his base salary for 52 weeks (i.e. $100,000). Accordingly, the termination provision was not guaranteed to meet or exceed the minimum statutory termination entitlement and could not be enforced.

As the termination clause was unenforceable, the implied presumption of common law reasonable notice, or damages in lieu, applied. In assessing the appropriate notice period, the Court considered the typical Bardal factors, including the character of employment, length of service, age, and availability of similar employment.  The Court determined that Mr. Hoem was entitled to a reasonable notice period of 19 months, and awarded Mr. Hoem $835,424 for damages in lieu of notice, and $106,329 for accrued vacation pay (as he was not paid vacation pay on his commissions).

The Court also awarded Mr. Hoem $35,000 in aggravated damages (i.e. to compensate for additional distress, pain or suffering) for Macquarie’s breach of its duty of good faith and fair dealing, but it refused to award any punitive damages. The Court held that while an employer’s failure to establish just cause for dismissal does not, on its own, constitute a breach of the duty of good faith and fair dealing, allegations that clearly had no prospect of success, like the allegation about the gummies, may. The Court found such allegations especially problematic because they can impact an employee’s ability to obtain new employment. To establish such compensable damages, more is required than the normal distress, upset or bad feelings that are typically experienced when dismissed – a plaintiff must prove serious and prolonged disruption rising above the typical psychological impacts of dismissal.

In rejecting an award of punitive damages (i.e. to punish outrageous conduct), the Court found that unreasonable conduct without more does not meet the high threshold for awarding punitive damages. The Court was unable to conclude that Macquarie also acted in bad faith in conducting the litigation the way it did, or that its litigation strategy amounted to arbitrary conduct that was a marked departure from ordinary standards of decent behaviour.

Significance for Employers

This case reminds employers of the risks of asserting cause for termination or after-acquired cause, particularly when the employer’s case is speculative or lacks cogence. Not all misconduct that is discovered after the employment relationship has ended will rise to the level of after-acquired cause, and employers need to be careful that such allegations are reasonably made in order to avoid exposing themselves to liability for aggravated or punitive damages.

This case also underscores the importance of carefully drafting termination clauses, especially where employees are compensated by base pay and commissions. If there is any possibility of a termination clause not meeting or exceeding the minimum statutory requirements, it will be found unenforceable and the employer will be liable to pay damages in lieu of reasonable notice if it terminates the employment relationship without cause.

Do not hesitate to contact a member of our L&E team if you would like to discuss the potential impact of this decision on your activities.