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CONSTRUCTIVEDISMISSALAPRIMER

ByErnestA.Schirru&JodyBrowno fKoskieMinskyLLP

Int roduct ion

Employment relationships may end in a variety of different ways: (i) the employerterminates the relationship for cause with no notice, (ii) the employer terminates therelationship without cause by giving notice or payment in lieu of notice, (iii) theemployee terminates the relationship, (iv) the relationship comes to an end due to

frustration, (v) the relationship comes to an end due tojob abandonment, (vi) therelationship comes to an following the completion of a fixed term contract, and (vi)constructivedismissal.

Constructive dismissal claims are premised on long standing principles of generalcontractlaw.Constructivedismissaloccurswhentheemployercommitsarepudiatorybreachoftheemploymentcontractwhicheitherdemonstratesthatitnolongerintends

toobservethetermsoftheemploymentagreementorwhoseconsequencesdeprivetheemployeeofsubstantiallyallofthebenefitstheemployeebargained for,thusallowing

theemployeetoterminatetheemploymentcontractandrecoverdamages.1

In themodern leading constructive dismissal case of Farber v. Royal Trust Co., the

SupremeCourtdescribedconstructivedismissalasfollows:

Where an employer decides unilaterally to make substantial changes to the essentialtermsofanemployeescontractofemploymentandtheemployeedoesnotagreetothechanges and leaves his or herjob, the employee has not resigned, but has beendismissed.Sincetheemployerhasnotformallydismissedtheemployee,thisisreferredtoasconstructivedismissal.Byunilaterallyseekingtomakesubstantialchangestothe

essentialterms

oftheemployment

contract,

theemployer

isceasing

tomeet

its

obligations and is therefore terminating the contract.Theemployee can then treat thecontractasresiliatedforbreachandcanleave.Insuchcircumstances,theemployeeisentitledtocompensationinlieuofnoticeand,whereappropriate,damages.

2

Thispaperwill serveasan introduction to theessentials of constructivedismissal aswell as provide a brief discussion of some other important considerations whencontemplatingthecommencementofaconstructivedismissalclaim.

Essent ialConsiderat ions

Therearethreeessentialconsiderationsinanysuccessfulconstructivedismissalclaim,namely:

1. What are the express and/or implied terms and/or conditions of theemploymentcontract?

2. Has there been a breach of the express and/or implied terms and/orconditionsoftheemploymentcontract?

1Ball,StaceyEmploymentLawinCanada,section13.242Farberv.RoyalTrustCo.,[1997]1S.C.R.846atpara24(perGonthierJ.)


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3.Assumingthereisabreach,isthebreachfundamentalinnaturesoastogiverisetoclaimforconstructivedismissal?

1. Whataretheexpressand/orimpliedtermsand/orcondi t ionso fth eemploymentcontract?

This first consideration is focused on whether the employers conduct indicates an

intention to no longer be bound by one or more of the fundamental/essential termsand/orconditionsoftheemploymentcontract,therebyrepudiatingit.Anunderstandingof the fundamental/essential terms and/or conditions of the employment contract isthereforeessential,astheconstructivedismissalclaimispremisedonachangetooneormoreofthesetermsand/orconditions.

Employmentcontractsaremadeupofexpressandimpliedterms.Theexpresstermsofanemploymentcontractwilloftenincludesuch thingsasremuneration, rank,hoursofworketc.Expresstermssetout inanyemploymentcontractprovidethecourtswithaclearexpressionofthepre-changestateoftheemploymentrelationship.Assumingthe

changetotheemploymentrelationshipgivingrisetoaconstructivedismissalclaimisa

changetoafundamental/essentialandexpresstermsetoutinanemploymentcontract,the task of making a constructive dismissal claim is more straightforward because itsimplifies thebefore-and-aftercomparison required tomakeasuccessful constructivedismissalclaim.

Aconstructivedismissalclaimpremisedonachangetoafundamental/essentialimpliedterminanemploymentcontractismorecomplexbecausethepre-changestateoftheemploymentrelationshipisnotaseasytoprove.Impliedtermsoftenfigureprominently

inanyconstructivedismissalclaimandwillfrequentlybethefocalpointinanydispute.Termscanbeimpliedbythecourtbasedoneitherapolicyrationaleorontheevidenceofthepartiescommonintentionsatthetimeofcontracting,similartotraditionalcontract

law.Thereisnoexhaustiveorgenerallyapplicablelistofimpliedtermsforemploymentcontracts. The party asserting an implied term bears of the onus of proving such aterm.3 Recently, in Colwell v. Cornerstone Properties, the Court found that covert

camerasurveillanceofanemployeebreachedanimpliedduty thateachpartywouldtreat theother ingood faithand fairly in theemploymentcontract. In the result, theemployersbreachofthisimpliedtermgaverisetoasuccessfulconstructivedismissalclaim.4 Similarly, in Reynolds v. Innopac Inc. the Ontario Court ofAppeal held that

requiringanexecutivetomovetoBritishColombiawasnotatermcontemplatedatthetimeofcontractingandthereforecouldnotbeimpliedterm,sotheemployerstransferof theexecutive, alongwith other factors, gave rise toa constructivedismissal claimwhichentitledtheemployeetodamages.5

When litigating a constructive dismissal claim, it is important to keep in mind thatexpressorimpliedtermsmayoperatetonotonlyrestrictemployerconductandsupportaconstrictivedismissalclaimbutalsotopermitcertainemployerconductthatotherwisecould be viewed as a constructive dismissal. There is no fundamental change if a

3OlympicIndustriesInc.v.McNeill(B.C.C.A.)4Colwellv.CornerstoneProperties,[2008]O.J.No.5092atpara36(S.C.J)(LittleJ.)5Reynoldsv.InnopacInc.(1998),34C.C.E.L.(2d)131atparas17-19andpara47.


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contractofemploymentexpresslyor impliedlyanticipates theemployerconductwhichbut for the existence of the express or implied term would give rise to a successfulconstructive dismissal claim. For example, in Ferdinand and Usz v. Global DriverServices Inc., theCourt foundthat therewasan impliedtermthat theemployercould

unilaterallyre-assignbusroutesofitsemployees.Asaresult,theemployeesclaimof

constructivedismissalarisingfromaroutereassignmentfailed.

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An employer can also be found to have repudiated an employment contract withoutchangingaspecifictermofthecontractonasingulardate.Inotherwords,theconductof an employer over a sustained period of time may cumulatively result in therepudiationoftheemploymentcontractgivingrisetoasuccessfulconstructivedismissalclaim. For example, in Shah v. Xerox, the Ontario Court of Appeal noted thatconstructivedismissalmaybefoundwhentheemployer'sconductamountsnotjustto

achangeinaspecifictermoftheemploymentcontractbuttorepudiationoftheentireemploymentrelationship.7InthecaseofShah,theemployerhadengagedinprolongedand unjustified criticism of the employee by way of critical performance reviews andunjustifiedwarningletterswhichresultedin theemployeesufferingemotionaldistress.

The employee eventually resigned and commenced a constructive dismissal claimwhereintheCourtultimatelyawardedhimdamages.

2. Hastherebeenabreach?

In context of a constructive dismissal claim, an employers breach of a term and/orconditionoftheemploymentcontractmustbeunilateral.Inotherwords,forabreachtoexist,theremustbeanabsenceofconsentonthepartoftheemployeetoanychangeinthetermsand/orconditionsimplementedbytheemployer.Anemployeesexpressor

tacitconsenttoafundamentalchangewillbefataltoaconstructivedismissalclaim.

In the context of a constructive dismissal claim employers frequently argue that theemployee has, by their conduct, agreed to or condoned the changes to theiremployment and therefore waived any right to claim constructive dismissal. The

existenceofanemployeesconsenttoafundamentalchangewillalwaysbedeterminedonacasebycasebasis.Thisfactualassessmentcanbecomeparticularlydifficultwhenthe duty to mitigate is considered. For example, inCayen v.Woodwards Store, theBritishColumbiaCourtofAppealconsideredwhetheranemployeetransfer(whichthe

employee alleged was a demotion) amounted to a constructive dismissal, the Courtnoted:

Inmyjudgment,averyheavyburdenwouldrestupon theemployertoshowthat therewasarealwaivertheemployercannothaveitbothways,thatismitigationandwaiver,

and itwill be rare indeedwhenan employerwill succeedona pleaofwaiverafteranemployeehasmitigatedhisorherdamagesafteracceptinganewposition.Itwouldbedifferent,ofcourse,iftheemployeecontinuesinthenewemploymentaftertheexpirationof a reasonable period roughly equivalent to what the law would impose by wayreasonablenotice.

8

6FerdinandandUszv.GlobalDriverServicesInc.,[1998]O.J.No.42257Shahv.XeroxCanadaLtd.,[2000]O.J.No.849atpara8(pertheCourt)8Cayenv.WoodwardsStoresLtd.,[1993]B.C.J.No.83atpara41(C.A.)


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TheOntarioCourt ofAppealhas stated that Allowingemployees reasonable time toassess thenew termsbefore theyare forced to takean irrevocable legalpositionnotonlyaddressestheirvulnerability,butalsopromotesstabilityandharmoniousrelationsin the workplace9 Put another way, an employee should not be punished by an

imputationofconsentontheirbehalf,whentheyhaveonlybeenreasonablymitigating

their damagesor assessinga change.Theassessment ofwhat is a reasonable timeperiod before an employee has waived their rights will always be contextual. In onecase,aslittleastwomonthswasfoundtobeawaiverwhileinanother6monthswas

still mitigation.10 If an employee continues in changed employment but expresslyprotests,awaiverwillrarelybefoundtoexistunlessaconsiderableamountoftimehaspast.11

It is important to keep in mind that an employers unilateral change to afundamental/essential term and/or condition of employment can be lawful if theemployeeisgivenreasonablenoticeoftheterminationoftheemploymentrelationshipcoupledwithanofferofre-engagementwithchangedterms.12

3. Isthebreachafundamentalone?

The test forwhether anemployment term is a fundamental term is not a subjectivetest. An employees personal distress as to the gravity of the change is not

determinative as to whether the change will ultimately viewed as a fundamentalchange.TheSupremeCourt inFarber v.Royal TrustCo. stated that the courtmustconsiderwhether a reasonableperson in the samesituationas theemployeewouldhave felt that the essential terms of the employment contract were substantially

changed13ThecontextualobjectivetestsetbytheSupremeCourtwasappliedbytheOntario Court ofAppeal inSmith v. Viking Helicopter Ltd. In this case, the Court of

Appealfoundthetrialjudgetobeinerrorforconcentratingonthestateofmindoftherespondent in this case to the virtual exclusion of a consideration of the company'sannouncedpolicy.14

Examplesofchangestoemploymenttermsand/orconditions thatcouldgiverisetoasuccessful constructivedismissal claim include changes to theessential dutiesof theemployee,wagesandbenefitsand locationofwork (assumingeachare termsof the

contract).

9Beltonv.LibertyInsuranceCo.ofCanada,[2004]O.J.No.3358atpara26.(perJurianszJ.A.)10SeeSchellenbergv.MarzenArtisticAluminiumLtd., [1986]B.C.J.No.1190andGarciav.NewmarWindows

Manufacturing(1996),25C.C.E.L.(2d)114(Ont.Ct.(Gen.Div))11Tilbev.RichmondRealtyLtd.,[1995]B.C.J.No.95412seeforexamplethediscussioninMichaudv.R.B.C.DominionSecuritiesInc.[2001]B.C.J.No.71113Farberv.RoyalTrustCo.atpara26.14seealsoBowenv.RitchieBros.AuctioneersLtd.,[1999]O.J.No.4102(C.A.)


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OtherConsiderat ions

(i )Employer sIntent ions

An employers good intentions and/or no specific intentions to repudiate afundamental/essentialtermand/orconditionofanemploymentcontractarenotsure-fire

defences toaconstructivedismissalclaim.Theexistenceofbadintentions,however,willalmostalwaysleadtoanincreaseinthequantumofdamagesawardedtoaplaintiffin the context of a claim for constructive dismissal. TheSupremeCourt inFarber v.RoyalTrustputitthisway:

for theemploymentcontract to be resiliated, it isnotnecessary for theemployer tohave intended to force the employee to leave his or her employment or to havebeenacting in bad faithwhenmaking substantial changes to the contracts essential terms.However, if the employer was acting in bad faith, this would have an impact on thedamagesawardedtotheemployee.

15

Similarly,theOntarioCourtofAppealinCoxv.RoyalTrustCorp.ofCanadaheldthat:

While I totally agree with the trialjudge that the defendant acted bona fide and withgenuineconcernbothforthecompanyandtheplaintiff,IdonotreadCanadianBechtalLtd.v.Mollenkopf,C.C.E.L.95,assayingthataproperlymotivatedcompanycannotbe

liableforconstructivedismissal. It isoneofthefactors,andan importantone,butheredoesnotoverridetheveryfundamentalchanges

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Goodintentionsmayonlybecomerelevant if thecourt impliesacontractual term thatallows an employer to reasonably re-organize the workplace.As one author has

noted:

Todaythecourtsappeartobemorereadythanbeforetoimplyarighttoreassigndutieswhere there are pressing business reasons for it, and where the court feels thatmanagementisactingreasonably.

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(i i)Ant ic ipatoryBreaches

Anticipatorybreachesallowapartytosueontherepudiationofacontractpriortothe

actual act of repudiation. When one party has made a clear or absoluteannouncement or indication that they intend to not be bound by the terms of thecontractatafuturedate,thedoctrineofanticipatorybreachallowstheinnocentpartytoconsiderthecontractrepudiatedatthatmoment.

InWronko v.Western InventoryServiceLtd. theOntarioCourt ofAppeal held that aletter indicating a future unilateral change to express termination provisions in anemploymentcontractwasarepudiationofthecontractbasedonanticipatorybreach.18At the timeof the letter theemployee couldhave considered the contract repudiated

andsuedforconstructivedismissal.

15Farberv.RoyalTrustCo.,[1997]1S.C.R.846atpara27.16Coxv.RoyalTrustCorp.ofCanada,[1989]O.J.No.675at5.17Ball,StaceyEmploymentLawinCanada,section13-3818Wronkov.WesternInventoryServiceLtd.(2008),90O.R.(3d)547atpara39(C.A.)(perWinklerC.J.O.)


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(i i i)Mit igat ion

Thedutytomitigateinaconstructivedismissalcaseisthesameasthedutytomitigateinastandardwrongfuldismissalcase.19TheSupremeCourt,quotingfromFarquharinEvans v. Teamsters Local Union No. 31, noted that the critical element is that anemployee not [be] obliged to mitigate by working in an atmosphere of hostility,embarrassmentorhumiliation20TheCourtgoesontostatethat:

I note that the nature of this inquiry increases the likelihood that individuals who aredismissedasaresultofachangetotheirposition(motivated,forexample,bylegitimatebusinessneedsratherthanbyconcernsaboutperformance)willberequiredtomitigatebyreturningtothesameemployermoreoftenthanthoseemployeeswhoareterminatedfor some other reason. This is not, however, because these individuals have beenconstructively dismissed rather than wrongfully dismissed, but rather because thecircumstancessurroundingtheterminationoftheircontractmaybefarlesspersonalthan

whendismissalrelatesmoredirectlytotheindividualsthemselves.

Thefocusinanydisputeaboutmitigationinthecontextofaconstructivedismissalclaim

willbewhethertheemployeesrefusaltoworkfortheemployerduringthenoticeperiodwouldsubject theemployee tohumiliationand/ordegradationsuchthat theemployee

canrefusetheworkratherthancontinueinanefforttomitigatetheirdamages.AlthoughtheSupremeCourtscommentsinEvanssuggestthatthetestforwhetheranemployeeshouldreturn toanemployer isanobjectiveone, itstill requiresacontextualcasebycaseanalysis.Forexample,inLoehlev.PurolatorCourierLtd.21,theOntarioSuperior

Court determined that the employee alleging constructive dismissal had in fact beenconstructivelydismissedbutbecausereturningtoworkfortheemployerwouldnothaveresultedinhostility,embarrassmentorhumiliation,theemployeehadanobligationtomitigate his damages by continuing to work for the former employer. By refusing toacceptwhatwas found tobeanobjectivelyreasonableworkoffer, theemployeewas

denieddamages.

Conclus ion

In todays ever changing and dynamic workplace environments, understanding thenuances of a constructive dismissal claim is essential to the practice of employmentlaw. In order to establish a constructive dismissal claim, the plaintiffmust be able toestablishwhat theexpressand/or implied termsand/or conditionsof theemploymentcontract are, that oneormoreof those termsand/or conditionshavebeenbreachedand that the breached terms and/or conditions form a fundamental part of the

employmentcontract.Anemployersgoodintentions inmaking the impugnedchangewill largely be irrelevant unless the court implies a term into the contract that the

employer can reasonably alter the terms of employment.Anticipatory breaches andmitigationaretwo importantconsiderationsthatwillundoubtedlyplayasignificantrole

inthelitigationofanyconstructiondismissalclaim.

19Evansv.TeamstersLocalUnionNo.31,2008SCC20atpara27.20Ibidatpara30.21Loehlev.PurolatorCourierLtd.,[2008]O.J.No.2462

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