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No One Gets Far in a Getaway Car

Discipline and Dismissals | Employment Contracts

A company car is a great perk. If you’re lucky enough to get your own company car as part of your compensation package, then you might be able to relate to a dismissed employee who was so broken up about having to return his company car that he refused to do so until a court ordered him to. This is indeed what happened in 415909 Canada Inc c.o.b. PARS 2000 v. Moghadam, 2024 ONSC 3886 (“Moghadam”), a case that has all the hallmarks of a primetime drama.

415909 Canada Inc c.o.b. PARS 2000 v. Moghadam

In Moghadam, the employee was the son of the two shareholders of his employer, a transportation service company. He worked for the company for 38 years, with his last role being general manager; he also held the role of director.

After certain financial irregularities were brought to his parents’ attention, they executed a resolution to appoint his sister the sole director. In July 2023, he was dismissed from the company and lost his directorship. Following the termination of his employment, he was asked to return the two company vehicles in his possession. A lawsuit ensued. Interestingly, the employee is the defendant in this case, and he has yet to commence a wrongful dismissal action.

The employer brought a motion to prohibit the employee from attending at the company and interfering with its business, as well as to have him return the company cars. He acquiesced to virtually all demands except the return of the vehicles.

The employer then brought a motion for recovery of property. The employee objected to returning the cars on the grounds:

  • that he was wrongfully terminated, and
  • that he should continue enjoying the benefit of the cars.

The Court held that should he be successful with this motion that:

  • he may be entitled to compensation for the value of the benefit of the company cars, but 
  • he had no right to their possession, especially since he had not even filed an action for wrongful termination.

Ultimately, the employee was ordered to return the vehicles and was slapped with the costs of the motion, which amounted to a sum of $10,000.00.

The HR Law Angle

While the employee made a compelling point, he got the law wrong. By default, all compensation must continue during the employee’s notice period; that includes perks like a company car or car allowance. However, it does not mean that the employee has a right to the employer’s property; upon dismissal, the employee must return all property in their possession, including the company car. That said, the employer must compensate the employee for the value of that benefit unless there is an agreement providing otherwise, or if the dismissal was for cause.

The Importance of Well Drafted Employment Contracts

Cases like Moghadam illustrate the value of a well drafted employment contract, which is the most important instrument in employers’ toolkits. These documents allow employers to be generous with perks, thereby rewarding employees, improving morale, and providing incentives to perform and stick around for the long term, while protecting employers’ rights.

As mentioned above, since the default position is that all compensation must continue throughout the notice period – either in its actual form or by providing payment in lieu – a contract allows employers to give these benefits while contracting out of the obligation to continue them after dismissal (other than during a statutory period). This provides cost certainty and flexibility.

With regards to company cars, a good contract would clearly set out each parties’ respective rights and obligations in relation to the car, and what happens once the employment relationship ends. Had there been a written contract in Moghadam, the employer might have been able to enforce its rights sooner, and at a lower cost.

Pith and Substance

If you’re an employer, we can help you prepare and implement strong written agreements that are tailored to your business’ specific needs. We also provide strategic advice on HR matters, such as dismissals, and can help you navigate these while avoiding costly legal battles. For example, in our dismissal letters, we always clearly state the employee’s obligation to return company property, and we set out exactly what must be returned.

If you’re an employee, we can help you understand your compensation package, as well as advise you as to your entitlements upon dismissal. We can review your employment agreement and supplementary documents and negotiate for a good severance offer. While you’re probably not entitled to the company car, you might be entitled to compensation for its loss. Who knows, you could even negotiate a deal where you get to keep the car! After all, we’re here to be practical, cost-efficient, and creative.

In summary, if Moghadam teaches anything, it’s this: call an employment lawyer before you (or your employee) drive off into the sunset. After all, they say nothing good starts in a getaway car.

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Stuart and others on the team at Rudner Law are frequent contributors to the following sites: 

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