Quebec Superior Court dismisses claim of constructive dismissal by former Rainy Day Investments Ltd. executive

October 7, 2021

2021 QCCS 3796

 In a September 15, 2021 decision, the Honourable Mark Phillips, J.S.C. of the Superior Court of Quebec dismissed Lorenzo Salvaggio’s (“Salvaggio”) claim for constructive dismissal against Rainy Day Investments Ltd. (“Rainy Day”), the investment company of one of DAVIDsTEA Inc.’s (“DAVIDsTEA”) founders, Herschel Segal. Salvaggio alleged that Rainy Day repudiated its employment agreement with him, forcing him to resign. He claimed the 12-month notice to which he was entitled under his employment agreement in the event of termination without serious reason.

Salvaggio had been employed by Rainy Day since 2014, acting as Segal’s right-hand man and key advisor in several companies in which Rainy Day had active investments, including DAVIDsTEA, which was its most important investment. As the result of a successful proxy fight involving DAVIDsTEA in June 2018, Salvaggio was asked by Segal to take on a senior advisory role with DAVIDsTEA, in addition to his existing responsibilities at Rainy Day. Salvaggio thereafter moved into an office at DAVIDsTEA, attended meetings with DAVIDsTEA executives and potential suppliers, and engaged in negotiations with Segal, Rainy Day, and DAVIDsTEA for a consulting agreement with the latter company, a draft document that was never finalized. Salvaggio claimed that the draft consulting agreement that he had been presented constituted a constructive dismissal because it purported to unilaterally transformed him into a consultant of DAVIDsTEA, and did not include certain provisions that were contained in his employment agreement with Rainy Day in case of termination without serious reason.

The Court held that Salvaggio’s new role at DAVIDsTEA did not constitute a breach of his employment agreement, and in fact was at the core of Salvaggio’s duties and responsibilities under his employment agreement with Rainy Day given the manner in which the agreement had been applied by the parties, as well as the significance of DAVIDsTEA to Rainy Day’s portfolio of investments. The Court further held that even if this was not the case, Salvaggio had acquiesced to the change. Finally, the Court highlighted the importance of properly drafting termination clauses in employment agreements in order to ensure an employee’s duty to mitigate applies.

Rainy Day was represented by a team comprised of Gary Rosen, Claudia Desjardins-Bélisle, Isabella Gallo and Guillaume Conraud-Arès (Labour & Employment) in the proceedings.