Supporting a finding of constructive dismissal
Background
In a recent series of articles, Stuart Rudner addressed issues relating to constructive dismissal. He provided suggestions on ways to initiate changes to an employment relationship without constructively dismissing the employee, and discussed the concept of mitigation as it applies in the context of constructive dismissal. He is frequently asked a more basic question, however: what is, and is not, sufficient change to support a finding of constructive dismissal?
Sufficient change and constructive dismissal
Generally speaking, a constructive dismissal occurs when one party unilaterally changes a fundamental term of the employment relationship without providing proper notice of the change. Obviously, not every change is enough to constitute a constructive dismissal. To qualify the change must relate to a fundamental term of the employment relationship. Unfortunately very few employment agreements specifically designate which of their terms are fundamental. And, of course, very few employees have written agreements at all.
To use a somewhat silly example, changing the location of an employee’s desk is unlikely to support a finding of constructive dismissal. However even that example must be used with a caveat. If the new desk somehow prevents the employee from carrying out her duties properly, or results in a loss of reputation within the organization, then it is arguable it would constitute a constructive dismissal. To make the example even sillier, if the new desk were located in the kitchen or washroom, the conclusion would be different. As in other areas of law, each case is fact-specific.
Among other things, the following can constitute constructive dismissal:
•a change in the method of calculating remuneration with a resulting significant reduction;
•a demotion;
•significant geographic relocation of the employee’s work base;
•failure to protect an employee from harassment.
Explicit terms in an employment agreement allowing an employer to make changes will provide a defence to an allegation of constructive dismissal. Circumstances may dictate that such terms will be implied. For example some employees will be found to have an implied term in their agreement allowing the employer to relocate them to distant offices. This generally applies to higher-level executives in national or international corporations. A company can move its premises within a reasonable distance without triggering the constructive dismissal of its employees. But the ultimate question, of course, is what is reasonable in the circumstances.
Recent cases show trend in what constitutes constructive dismissal
A review of recent cases in Canada provides some examples of what the courts have found to be constructive dismissals. First up is a case where the claim of constructive dismissal was rejected. In Lemay v. Canada Post Corp., Marc Lemay alleged he had been constructively dismissed for a number of reasons, including an increase in his annual sales target from $10 million to $120 million, a change of title from direct marketing specialist to communications solution specialist, relocation to a home office and slanderous comments made by a colleague.
Justice Smith of the Ontario Superior Court of Justice reviewed the legal test for constructive dismissal, as set out by the Supreme Court of Canada in Farber v. Royal Trust Co.:
“...where an employer unilaterally makes a fundamental or substantial change to an employee’s contract of employment... a change that violates the contract’s terms... the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed. The employee can then claim damages from the employer in lieu of notice.”
Justice Smith also confirmed previous decisions of the Ontario Court of Appeal and the Alberta Court of Queen’s Bench that the alleged grounds for constructive dismissal must be actual conduct of the employer and not simply the employee’s perception. In other words there must be some objective conduct on the part of the employer to constitute a constructive dismissal.
In reviewing the alleged bases for constructive dismissal in Lemay, Justice Smith found Lemay misconstrued the facts and that his individual sales target was not increased as alleged. He also found Lemay’s employment did not require an office at the corporation’s building and he did not object to the relocation to a home office — in fact, he worked there for three years. Although an employee will not be deemed to have accepted a change if he continues to work for a brief period of time without complaint, it is hard to explain a delay of three years. Finally the court found the slanderous comments made by a colleague were dealt with appropriately by the employer. As a result there was no evidence of a constructive dismissal.
When the promotion doesn’t work out
Two recent decisions in British Columbia address scenarios where an employee was promoted, and the employer subsequently decided the employee was not working out in her new position. In Wilson v. New Westminster Chamber of Commerce, Diane Wilson was hired in July 1998. The manager to whom she reported was dismissed in January 1999, and Wilson was offered the manager’s position, along with a slight increase in salary (although not to the same level as that of her former manager). Soon after the promotion, the chamber complained about her performance and began advertising the position. Wilson was invited to apply for it.
When someone else was hired, Wilson was offered a secretarial position at her previous salary. The chamber of commerce took the position that Wilson’s additional duties had been assigned on a temporary basis. But the trial judge was skeptical of this explanation and found that, in any event, Wilson was not told of this intention. She was allowed to believe the change was permanent. The subsequent demotion was found to constitute a constructive dismissal.
In Peterson v. Wilson Logistics (Canada) Inc., Roberta Peterson started as a sales account executive earning $45,000 and was promoted to branch manager with an increase in salary to $60,000. Issues arose and she was told she would be reassigned to her old job or, if she declined, would be given a severance package. The company took the position there was an implied “probation period” after the promotion during which the company could dismiss Peterson or demote her if she was unsuitable for the new role.
This argument was supposedly based upon the Ontario Court of Appeal decision in Misfud v. MacMillan Bathurst Inc., a case I have previously referred to as authority for the rule that an employee may have to mitigate damages if he has been constructively dismissed. Justice Lowry held that comments in Misfud relating to the supposed probation period were not binding law in Canada. Justice Lowry confirmed Misfud did not say anything about a right to terminate the employee during the so-called “probation period” and the right to put the employee back in their previous position cannot be implied in all cases. Peterson was found to have been wrongfully dismissed.
The two B.C. cases make it clear demotions will generally constitute constructive dismissals. That is true whether the employee is demoted back to a previously held position after a promotion or whether the employee is simply being reassigned to a lesser position.
An example of the latter scenario is Wychopen v. Northwestern Utilities Ltd., a recent decision of the Albert Court of Queen’s Bench. In that case, Barbard Wychopen was a supervisor for 14 years with 10 years of intermittent service prior to that. As a result of a corporate reorganization, Wychopen was asked to assume functions previously performed by her staff. The trial judge found the proposed changes constituted a fundamental and substantial change and that Wychopen had therefore been constructively dismissed.
A recent decision of the Employment Standards Tribunal of British Columbia is worthy of note. In Re Comet Transport Ltd., the employee in question was the single mother of two children, aged 10 and 15. She began working for Comet in October 1993. She worked from 6 a.m. to 2 p.m., which allowed her to be home when her children returned from school. On Feb. 25, 2002, the employee was told that, effective the following day, she would be expected to work from 10 a.m. to 6:30 p.m. Soon thereafter she found new employment at a lower hourly wage. She then told her employer she could not continue to work for them given the new shift to which she had been assigned.
The investigator initially found there was no constructive dismissal. Subsequently an adjudicator conducted a formal evidentiary hearing (which the investigator had not done) and reached the conclusion it was an implied term of the employment contract that the complainant would not be required to work a shift that would interfere with her ability to meet family responsibilities.
Furthermore the adjudicator found the reasons given by the company for the shift change did not survive scrutiny and the company made no attempt to accommodate the employee’s family responsibilities. On appeal the tribunal upheld the findings of the adjudicator.
I feel compelled to briefly mention the fact that, occasionally, ill-advised employers try to force an employee to resign rather than terminating her employment. Usually this is done when the company no longer wants the individual but does not want to make a hefty payment in lieu of notice. Sometimes the employer will strip the individual of job responsibilities, change her job title and alter working conditions to make the employee’s life miserable.
I have been consulted by people that have essentially been left with no job at all — they would report to work, and continue to be paid, but had nothing to do. Their employer froze them out of all activities, meetings and decisions, essentially leaving them to rot and hoping they give up and leave. This is not an advisable practice.
The guiding principles regarding what constitutes a constructive dismissal were set out by the Supreme Court of Canada in the Farber case. Since then courts across the country have assessed specific fact situations and, in so doing, created a body of case law that provides further guidance. But there is no hard and fast rule to determine what is, or is not, a fundamental or substantial change to the employment contract.
For more information see:
• Lemay v. Canada Post Corp. (2003), 2003 CarswellOnt 2936, 26 C.C.E.L. (3d) 241 (Ont. S.C.J.)
• Farber v. Royal Trust Co. (1996), 1996 CarswellQue 1158, 1996 CarswellQue 1159, 145 D.L.R. (4th) 1, 27 C.C.E.L. (2d) 163, [1997] 1 S.C.R. 846, 210 N.R. 161 (S.C.C.)
• Wilson v. New Westminster Chamber of Commerce, 2003 CarswellBC 1354, 2003 BCPC 170 (B.C. Prov. Ct.)
• Peterson v. Wilson Logistics (Canada) Inc., 2003 CarswellBC 305, 2003 BCSC 215 (B.C. S.C.)
• Wychopen v. Northwestern Utilities Ltd., 2003 CarswellAlta 1008, 2003 ABQB 593 (Alta. Q.B.)
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at [email protected].
In a recent series of articles, Stuart Rudner addressed issues relating to constructive dismissal. He provided suggestions on ways to initiate changes to an employment relationship without constructively dismissing the employee, and discussed the concept of mitigation as it applies in the context of constructive dismissal. He is frequently asked a more basic question, however: what is, and is not, sufficient change to support a finding of constructive dismissal?
Sufficient change and constructive dismissal
Generally speaking, a constructive dismissal occurs when one party unilaterally changes a fundamental term of the employment relationship without providing proper notice of the change. Obviously, not every change is enough to constitute a constructive dismissal. To qualify the change must relate to a fundamental term of the employment relationship. Unfortunately very few employment agreements specifically designate which of their terms are fundamental. And, of course, very few employees have written agreements at all.
To use a somewhat silly example, changing the location of an employee’s desk is unlikely to support a finding of constructive dismissal. However even that example must be used with a caveat. If the new desk somehow prevents the employee from carrying out her duties properly, or results in a loss of reputation within the organization, then it is arguable it would constitute a constructive dismissal. To make the example even sillier, if the new desk were located in the kitchen or washroom, the conclusion would be different. As in other areas of law, each case is fact-specific.
Among other things, the following can constitute constructive dismissal:
•a change in the method of calculating remuneration with a resulting significant reduction;
•a demotion;
•significant geographic relocation of the employee’s work base;
•failure to protect an employee from harassment.
Explicit terms in an employment agreement allowing an employer to make changes will provide a defence to an allegation of constructive dismissal. Circumstances may dictate that such terms will be implied. For example some employees will be found to have an implied term in their agreement allowing the employer to relocate them to distant offices. This generally applies to higher-level executives in national or international corporations. A company can move its premises within a reasonable distance without triggering the constructive dismissal of its employees. But the ultimate question, of course, is what is reasonable in the circumstances.
Recent cases show trend in what constitutes constructive dismissal
A review of recent cases in Canada provides some examples of what the courts have found to be constructive dismissals. First up is a case where the claim of constructive dismissal was rejected. In Lemay v. Canada Post Corp., Marc Lemay alleged he had been constructively dismissed for a number of reasons, including an increase in his annual sales target from $10 million to $120 million, a change of title from direct marketing specialist to communications solution specialist, relocation to a home office and slanderous comments made by a colleague.
Justice Smith of the Ontario Superior Court of Justice reviewed the legal test for constructive dismissal, as set out by the Supreme Court of Canada in Farber v. Royal Trust Co.:
“...where an employer unilaterally makes a fundamental or substantial change to an employee’s contract of employment... a change that violates the contract’s terms... the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed. The employee can then claim damages from the employer in lieu of notice.”
Justice Smith also confirmed previous decisions of the Ontario Court of Appeal and the Alberta Court of Queen’s Bench that the alleged grounds for constructive dismissal must be actual conduct of the employer and not simply the employee’s perception. In other words there must be some objective conduct on the part of the employer to constitute a constructive dismissal.
In reviewing the alleged bases for constructive dismissal in Lemay, Justice Smith found Lemay misconstrued the facts and that his individual sales target was not increased as alleged. He also found Lemay’s employment did not require an office at the corporation’s building and he did not object to the relocation to a home office — in fact, he worked there for three years. Although an employee will not be deemed to have accepted a change if he continues to work for a brief period of time without complaint, it is hard to explain a delay of three years. Finally the court found the slanderous comments made by a colleague were dealt with appropriately by the employer. As a result there was no evidence of a constructive dismissal.
When the promotion doesn’t work out
Two recent decisions in British Columbia address scenarios where an employee was promoted, and the employer subsequently decided the employee was not working out in her new position. In Wilson v. New Westminster Chamber of Commerce, Diane Wilson was hired in July 1998. The manager to whom she reported was dismissed in January 1999, and Wilson was offered the manager’s position, along with a slight increase in salary (although not to the same level as that of her former manager). Soon after the promotion, the chamber complained about her performance and began advertising the position. Wilson was invited to apply for it.
When someone else was hired, Wilson was offered a secretarial position at her previous salary. The chamber of commerce took the position that Wilson’s additional duties had been assigned on a temporary basis. But the trial judge was skeptical of this explanation and found that, in any event, Wilson was not told of this intention. She was allowed to believe the change was permanent. The subsequent demotion was found to constitute a constructive dismissal.
In Peterson v. Wilson Logistics (Canada) Inc., Roberta Peterson started as a sales account executive earning $45,000 and was promoted to branch manager with an increase in salary to $60,000. Issues arose and she was told she would be reassigned to her old job or, if she declined, would be given a severance package. The company took the position there was an implied “probation period” after the promotion during which the company could dismiss Peterson or demote her if she was unsuitable for the new role.
This argument was supposedly based upon the Ontario Court of Appeal decision in Misfud v. MacMillan Bathurst Inc., a case I have previously referred to as authority for the rule that an employee may have to mitigate damages if he has been constructively dismissed. Justice Lowry held that comments in Misfud relating to the supposed probation period were not binding law in Canada. Justice Lowry confirmed Misfud did not say anything about a right to terminate the employee during the so-called “probation period” and the right to put the employee back in their previous position cannot be implied in all cases. Peterson was found to have been wrongfully dismissed.
The two B.C. cases make it clear demotions will generally constitute constructive dismissals. That is true whether the employee is demoted back to a previously held position after a promotion or whether the employee is simply being reassigned to a lesser position.
An example of the latter scenario is Wychopen v. Northwestern Utilities Ltd., a recent decision of the Albert Court of Queen’s Bench. In that case, Barbard Wychopen was a supervisor for 14 years with 10 years of intermittent service prior to that. As a result of a corporate reorganization, Wychopen was asked to assume functions previously performed by her staff. The trial judge found the proposed changes constituted a fundamental and substantial change and that Wychopen had therefore been constructively dismissed.
A recent decision of the Employment Standards Tribunal of British Columbia is worthy of note. In Re Comet Transport Ltd., the employee in question was the single mother of two children, aged 10 and 15. She began working for Comet in October 1993. She worked from 6 a.m. to 2 p.m., which allowed her to be home when her children returned from school. On Feb. 25, 2002, the employee was told that, effective the following day, she would be expected to work from 10 a.m. to 6:30 p.m. Soon thereafter she found new employment at a lower hourly wage. She then told her employer she could not continue to work for them given the new shift to which she had been assigned.
The investigator initially found there was no constructive dismissal. Subsequently an adjudicator conducted a formal evidentiary hearing (which the investigator had not done) and reached the conclusion it was an implied term of the employment contract that the complainant would not be required to work a shift that would interfere with her ability to meet family responsibilities.
Furthermore the adjudicator found the reasons given by the company for the shift change did not survive scrutiny and the company made no attempt to accommodate the employee’s family responsibilities. On appeal the tribunal upheld the findings of the adjudicator.
I feel compelled to briefly mention the fact that, occasionally, ill-advised employers try to force an employee to resign rather than terminating her employment. Usually this is done when the company no longer wants the individual but does not want to make a hefty payment in lieu of notice. Sometimes the employer will strip the individual of job responsibilities, change her job title and alter working conditions to make the employee’s life miserable.
I have been consulted by people that have essentially been left with no job at all — they would report to work, and continue to be paid, but had nothing to do. Their employer froze them out of all activities, meetings and decisions, essentially leaving them to rot and hoping they give up and leave. This is not an advisable practice.
The guiding principles regarding what constitutes a constructive dismissal were set out by the Supreme Court of Canada in the Farber case. Since then courts across the country have assessed specific fact situations and, in so doing, created a body of case law that provides further guidance. But there is no hard and fast rule to determine what is, or is not, a fundamental or substantial change to the employment contract.
For more information see:
• Lemay v. Canada Post Corp. (2003), 2003 CarswellOnt 2936, 26 C.C.E.L. (3d) 241 (Ont. S.C.J.)
• Farber v. Royal Trust Co. (1996), 1996 CarswellQue 1158, 1996 CarswellQue 1159, 145 D.L.R. (4th) 1, 27 C.C.E.L. (2d) 163, [1997] 1 S.C.R. 846, 210 N.R. 161 (S.C.C.)
• Wilson v. New Westminster Chamber of Commerce, 2003 CarswellBC 1354, 2003 BCPC 170 (B.C. Prov. Ct.)
• Peterson v. Wilson Logistics (Canada) Inc., 2003 CarswellBC 305, 2003 BCSC 215 (B.C. S.C.)
• Wychopen v. Northwestern Utilities Ltd., 2003 CarswellAlta 1008, 2003 ABQB 593 (Alta. Q.B.)
Stuart Rudner practices civil litigation and employment law with Miller Thomson LLP’s Toronto office. He can be reached at (416) 595-8672 or via e-mail at [email protected].
