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Former Shell Executive gets $800,000 for Wrongful Dismissal
Employment Law

Former Shell Executive gets $800,000 for Wrongful Dismissal

In Alberta, a former Shell Canada executive was found to have been wrongfully dismissed, and was awarded an impressive $800,000.

The Facts

Kathryn Underhill was a Vice President for Shell Canada for 18 months, and had worked at Shell Canada for nearly 17 years before becoming an executive.

In 2015, the oil industry in Alberta was doing poorly, as oil prices were falling rapidly. Consequently, Shell decided to look for ways to save money. Underhill was instructed by Lorraine Mitchelmore, President of Shell, to find savings of $100 million from her department’s budget.

On August 19, 2015, Underhill met with her department, and advised them that Shell was planning further layoffs and employment restructuring in the fall. Lisa Mueller, who reported directly to Underhill asked if Shell would consider voluntary terminations (i.e. termination with severance pay). Underhill responded that she thought it unlikely.

Mueller had inquired about voluntary termination because she wanted to make a proposal for the Personal Safety Collaboration (PSC) project, which was run by the Oil Sands Safety Association (OSSA). At this time, Shell was part of OSSA.

On August 31, 2015, Mueller and Underhill met: Underhill told Mueller that she was planning to terminate her employment due to restructuring. At this meeting, Mueller mentioned her PSC proposal to Underhill. Underhill, believing that this was merely an idea, cautioned Mueller to be careful not to get herself into a position of conflict. Unknown to Underhill, Mueller had already sent a copy of her proposal to Peter Zebedee, Shell’s representative at OSSA. 

On September 1, Underhill and Mueller spoke over the phone. Mueller said she wanted to be let go from Shell because she wanted to pursue her idea and was concerned she would have a conflict of interest if she was still employed by Shell. Underhill then spoke with Bonnie Vogeli, Shell’s legal advisor. Vogeli responded to Underhill that, if Mueller presented the idea to OSSA, Shell’s representatives would have to abstain from the decision. Additionally, there was a concern regarding Mueller’s knowledge of a PSC proposal from Accenture, a third party.

Unknown to Underhill, Mueller had forwarded her proposal to Mark Little, Chair of the Board of Directors of OSSA. Little then emailed Zebedee, stating that he would not pursue Mueller’s proposal due to the conflict of interest with Accenture.

Subsequently, Shell’s legal department ordered an investigation regarding Mueller. Aside from terminating Mueller, the investigation decided that Underhill was to be terminated for failing to identify a conflict of interest and protect third party confidential information, breach of confidence, and disregard for termination procedures.

The Legal Analysis

To evaluate whether Underhill was terminated for just cause, the court applied the McKinley factors: the nature and extent of the employee’s misconduct; the context and surrounding circumstances; and whether the alleged misconduct is so incompatible with the fundamental terms of the employment relationship that it warrants dismissal (i.e. whether the termination was proportionate to the misconduct).

When examining Underhill’s misconduct, the court found that Underhill was not culpable for not identifying the conflict of interest, and that she had not disregarded termination procedures, but had breached confidence. Regarding the alleged conflict of interest, the court found that Underhill did not actually know the substance of Mueller’s proposal, let alone what confidential information from Accenture it used. Regarding the alleged disregard termination procedures, the court found that when Underhill told Mueller that she would be let go, Underhill did not say when Mueller would be terminated, only that Mueller would be terminated eventually. Regarding the breach of confidence, the court found that Underhill had breached the confidence of Shell by communicating to her subordinates, including Mueller, that they would be terminated.

When examining the context of the misconduct, the court noted that Underhill had been an exemplary employee prior to her misconduct. Her long tenure with the company, and that she had risen from a summer student to a Vice President, also were considered significant by the court.

When examining the proportionality of the termination to the misconduct, it was determined that the breaches of confidence were “not so serious as to give rise to a breakdown in the employment relationship”. The court suggested that warnings and disciplinary action short of termination could have been applied instead of termination.

Accordingly, the court found that Underhill had been wrongfully dismissed.

The Result

In consideration of her Bardal factors, her salary at Shell, and her inability to secure employment since her termination, the court decided to award her $800,000 plus prejudgment interest and costs.

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