CEO Loses $115K Constructive Dismissal Award, Secretly Built Rival Company

What Happened?

A CEO’s constructive dismissal victory has been reversed — with a court finding her decision to secretly build a rival company prior to her resignation established after-acquired cause.

📺 WATCH: Constructive Dismissal — Your Rights

What You Need to Know

• In 2006, Laura Araneda is chosen to serve as President of VIC Progressive Diamond Drilling Inc. She begins using the title of Chief Executive Officer (CEO) in 2015.
• In July 2020, Araneda meets with a solicitor to incorporate a direct competitor of VIC. She reserves the domain name, opens bank accounts, arranges insurance, and sets up email addresses for the new company.
• In July 2020, Araneda redirects a recurring VIC client contract to this new company.
• Suspicious about her activities over the summer, VIC’s board moves Araneda from CEO to Chief Financial Officer (CFO) on Sept. 7, 2020.
• Instead of replying to the new president’s message about her future role, she resigns after 27 years of service and files a constructive dismissal claim.
• A trial judge rules in favour of Araneda — awarding her $115,240 in damages.
• VIC appeals the decision. The award is reversed based on the misconduct discovered and Araneda is required to pay her former employer $3,000.

Key Takeaways

For Employees

Employees are generally allowed to consider future opportunities while still working. That can include planning a new job or even thinking about starting a business.

However, there are limits. If you are in a senior role, especially in a leadership or executive position, your obligations are much stricter.

Taking active steps to build a competing business while still employed, even if it hasn’t officially launched, can cross the line. In some cases, that alone can be enough for your employer to let you go without severance pay.

For Employers

This case confirms that a serious breach of trust at the executive level can warrant a termination for cause, even if the misconduct is discovered at a later date.

However, the legal threshold for this type of dismissal remains high. Employers should always seek legal advice before letting a staff member go — regardless of where they are on the corporate ladder.

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Disclaimer: The materials above are provided as general information about the rights of non-unionized employees in Canada. It is not specific to any one company and SHOULD NOT be read as suggesting any improper conduct on the part of any specific employer, or a relationship between Samfiru Tumarkin LLP and a specific employer.