E-mail dismissal costs Microsoft $9 million

SYDNEY--Microsoft must pay some $9 million to a former Australian employee who was fired via an e-mail message and denied share options in the world's largest software maker, a court ruled.

The New South Wales state Industrial Relations Commission ruled that Michael Canizales, who had an option to buy about 100,000 Microsoft shares at between $5 and $7 each, was dismissed in such a way that prevented him from using his options. Microsoft stock closed at $70.19 Friday.

Canizales, 31, was a senior human-resources executive who started with Microsoft in 1989. He was transferred to Sydney in 1995 to help set up Ninemsn, Microsoft's 50-percent-owned venture with Kerry Packer's ecorp Internet unit.

Three years later, Microsoft fired him via an e-mail message. Canizales had received his stock options in 1995 and was supposed to be able to exchange them into ordinary stock in July 1999.

KPMG Legal said Canizales was set to receive Australia's most expensive payout because of the way he was terminated.

"Being retrenched by e-mail is hardly a suitable way to be told your services are no longer required," said Chris McArdle, Canizales' KPMG counsel said in a statement. "To be retrenched in a way that deliberately denies access to share options is scandalous," he said.

Canizales said the judgment vindicates his assertion that Microsoft was "unfair" in the way in which it handled his contract. "We feel we were able to substantiate our position and now I can move on with my life," he said.

Microsoft is reviewing its next step, Microsoft Australia spokeswoman Helen Baric said. She said Canizales was treated "fairly and equitably." His position of human-resources and finance director at ecorp's venture with Microsoft was made "redundant" in 1998, she said.

"An inference may reasonably be drawn that the conduct of Microsoft was designed to ensure that the applicant did not achieve his 1999 stock options." Judge Russell Peterson said in his ruling Friday.

The payment could total an estimated $9 million, KPMG said.

Peterson asked Microsoft to pay severance, including a payment for four weeks' salary plus two weeks' pay for every six months of service, capped at 26 weeks of his base salary. Stock options, which represent most of the award money, also were granted.

KPMG said Peterson's decision was Australia's biggest employee judgment based on the value of the payout.

Canizales, now an Australian resident, is chief executive of closely held Chakra Alliance, an operator of high-end health spas in Sydney and Melbourne.