Source: http://employmentlaw101.ca/07-types-of-unilateral-changes-that-may-trigger-a-constructive-dismissal/
Timestamp: 2019-04-24 04:20:19+00:00

Document:
The types of “substantial change” made to the terms of an employee’s employment contract that will trigger a constructive dismissal are many. Significantly, even if an employee has been constructively dismissed, he or she may be required to remain with her employer in order to mitigate her damages (discussed in detail below).
A court when considering a claim that an employee was constructively dismissed will consider the significance of the change and if the employee’s employment contract either explicitly or implicitly allowed the employer to make the unilateral change to the employee’s terms of employment.
The most obvious example of a constructive dismissal occurs when an employee is demoted to a more junior position or has key job responsibilities removed. The question is whether the reduction in job responsibilities is significant enough that the change has fundamentally altered the terms of the employee’s employment contract.
Although rare it is possible that a constructive dismissal may occur if the employee is promoted against her wishes into a more senior role, particularly if the employee’s compensation remains the same.
In Palumbo v. Research Capital Corporation3 the Court found that the plaintiff, who held the position of head of corporate finance in Toronto, had been constructively dismissed when the employer assigned duties formerly held exclusively by the plaintiff to another employee. The practical impact of the change was to demote the plaintiff as he now had to share his position as head of corporate finance with another individual. The trial decision was affirmed by the Ontario Court of Appeal on this issue.
In Chandran v National Bank of Canada4 the plaintiff was a senior manager with 18 years of service who was responsible for a team of eleven subordinates. A survey of the plaintiff’s subordinates found complaints about his management style. The Bank did not investigate the complaints, refused to provide the plaintiff with particulars of the complaints made against him and refused to provide the plaintiff with an opportunity to respond to the allegations. Instead, it gave him with a disciplinary letter notifying him that he was being demoted to one of two lesser positions without any supervisory responsibility at the Bank’s Toronto head office. His compensation would remain the same.
The plaintiff refused to accept the demotion and took the position that he had been constructively dismissed. The trial judge found that the plaintiff had been constructively dismissed. The judge rejected the Bank’s arguments that, even if the plaintiff had been constructively dismissed, he should have remained employed with the Bank to mitigate his damages. The judge accepted the plaintiff’s lawyer’s arguments that it would have been humiliating for the plaintiff to continue his employment at the Bank given the circumstances that led to his demotion. The Ontario Court of Appeal upheld the trial judge’s decision.
In contrast in Gillis v. Sobeys Group Inc.5 the Nova Scotia Supreme Court held that an employee had resigned after she refused to accept an alternative position offered by her employer after it had eliminated her position. The plaintiff had been employed for 28 years when her position was eliminated. Her employer offered her an alternative position which would have seen her return to one of one of its stores where she would have earned a slightly lower salary. The employee claimed the hours of work at the new position would also have presented her with child care concerns. The Court found that the change in position was not a demotion but rather a lateral transfer and that the changes to the employee’s role were not sufficient to justify her refusal to accept the position.
Meyers v. Chevron Canada Ltd.6 is another example of an employee failing to prove that a change to his job duties triggered a constructive dismissal. The plaintiff had been employed by Chevron for 16 years and worked as a team lead in its information technology department when his group was restructured. The plaintiff was offered the alternative role of business analysis. As a team lead, the plaintiff had responsible for his own work as well as that of three employees and two contractors. However, his reassignment to a business analyst position meant that he would no longer have a managerial position or be responsible for operational budgets.
Chevron’s position was that the business analysis role offered to the plaintiff was equivalent to his previous role. The plaintiff’s salary and benefits were to remain the same. Chevron also argued that the scope of the business analyst role was the same as the plaintiff’s previous role. Although the plaintiff would no longer have had any direct reports, he would continue to provide direction to employees assigned to work on his projects and provide performance input to their managers for the purposes of performance reviews. Moreover, in Chevron’s view, even if the change in the plaintiff’s position was a constructive dismissal, the plaintiff had a duty to accept the change in position in order to mitigate his loss, particularly given the fact that his salary and benefits remained unchanged.
The trial judge found that although there had been some diminishment of the plaintiff’s responsibilities in that he no longer directly supervised any employees or had responsibility for an operations budget, the diminishment was not enough to constitute a fundamental breach of his employment contract. The plaintiff was ordered to pay Chevron a portion of its legal costs.
A significant reduction in an employee’s compensation may constitute a constructive dismissal. There is no hard red line that will automatically trigger a constructive dismissal. However, reductions of greater than 10% will certainly place an employer at risk of being found to have constructively dismissed the effected employee. Whether the reduction in compensation will entitle the employee to claim that she has been constructively dismissed will depend upon the magnitude of the pay reduction, the form of compensation that was reduced, and whether the employee was aware that an adjustment could have been made at some time during her employment.
Reductions in the amount paid for a bonus, commission rates, and other variable compensation plans often raise contentious questions as to whether the employer was entitled to change these particular terms of employment at its discretion. The courts have shown a willingness to provide employers with greater flexibility to alter employees’ variable compensation than their fixed hourly wages or base salary. For example, in 2017 the Ontario Court of Appeal in Chapman v. GPM Investment Management7 upheld the decision of the trial judge who found that the employer’s refusal to pay its CEO a one time bonus of $329,687.00 was not a constructive dismissal. The judge reached this decision based on the finding that all other terms and conditions of employment remained in place and that the employee, who was a sophisticated business person, had other options to pursue payment of the bonus (such as proposing arbitration) rather than quitting a claiming a constructive dismissal.
The plaintiff in O’Sullivan v. Cavalier Tool & Manufacturing Ltd.8 was called into a management meeting and told that he would no longer be the acting shop foreman and, instead, he would be transferred to work as an hourly employee on the shop-floor. As shop foreman, the plaintiff had been earning $93,000.00 per year. Prior to being temporarily promoted to acting shop foreman the plaintiff had been a supervisor and earned approximately $90,000 per year. The demotion of the plaintiff to an hourly employee would have resulted in a $35,000.00 decrease of the plaintiff’s annual income. Not surprisingly the Court found that the plaintiff had been constructively dismissed. The Ontario Court of Appeal upheld the decision of the trial judge.
In Therrien v. True North Properties Ltd.9 the Court found that the plaintiff had been constructively dismissed. The plaintiff, a chartered accountant, was advised by his employer after only a year of employment that it would no longer be able to employ him full time and that he should seek part-time contract work to make up for his loss of earnings. The defendant argued, unsuccessfully, that because the plaintiff was paid through his professional corporation he was not an employee but an independent contractor and therefore could not be constructively dismissed.
Harassment is often defined as behaviour that is unwelcome or ought to be reasonable known as unwelcome. However, it is important to note that an employer is entitled to manage the workplace. In this regard, it is not harassment if an employer is critical of an employee’s work performance or if the employer disciplines an employee for some other work related shortcoming. Only in situations where the employer’s treatment of the employee cannot be reasonably justified on business grounds will the employer’s actions be classified as harassment, or where the discipline imposed was designed to humiliate and degrade the employee, will the employer be at risk of having constructively dismissed the employee.
Workplaces become poisoned for the purpose of constructive dismissal only where serious wrongful behaviour is demonstrated. The plaintiff bears the onus of establishing a claim of a poisoned workplace. As the trial judge recognized, the test is an objective one. A plaintiff’s subjective feelings or even genuinely-held beliefs are insufficient to discharge this onus. There must be evidence that, to the objective reasonable bystander, would support the conclusion that a poisoned workplace environment had been created. See for example, Ata-Ayi v. Pepsi Bottling Group (Canada) Co. (2006), 54 C.C.E.L. (3d) 148 (Ont. S.C.), at paras. 23 and 40; Bobb v. Alberta (Human Rights and Citizenship Commission), 2004 ABQB 733, 370 A.R. 389, at para. 85; Houtz v. 772910 Ontario Inc. (c.o.b. McFee’s Tavern),  O.J. No. 475 (S.C.), at para. 45; Canada (Canadian Human Rights Commission) v. Canada (Canadian Armed Forces) (re Franke),  3 F.C. 653 (T.D.), at paras. 43-46.
The courts in Canada initially differed on the specific legal analysis used to support a finding that harassment and workplace bullying can trigger a constructive dismissal. Some decisions, such as Sheppard v. Sobeys Inc.,13 found that workplace harassment constitutes a breach of a fundamental implied term of the contract of employment. Other decisions, such as the Ontario Court of Appeal’s decision in Shah v. Xerox Canada Ltd.,14 found that it was not necessary to find a fundamental term of the employment contract had been breached in order to find that a constructive dismissal had occurred.
In Xerox, the plaintiff/employee had received good reviews and pay increases for his first twelve years of employment. However, this changed when the plaintiff accepted an internal transfer position and began reporting to a new manager. His new work group adopted a work philosophy known as “empowerment”. Its purpose was to encourage entrepreneurial and independent thinking. However, the employee had difficulty adapting to the new environment and was confused as to who he should report to. As a result, he targeted by his manager.
Where the conduct of management personnel is calculated to cause an employee to withdraw from the employment, it may, in my judgment, amount to constructive dismissal. The test, I believe, is objective: it is whether the conduct of the manager was such that a reasonable person in the circumstances should not be expected to persevere in the employment. As the particular circumstances are crucial, each case must be decided on its own facts. The test should not be lightly applied. An employer is entitled to be critical of the unsatisfactory work of its employees and, in general, to take such measures – disciplinary or otherwise – as it believes to be appropriate to remedy the situation. There is, however, a limit. If the employer’s conduct in the particular circumstances passes so far beyond the bounds of reasonableness that the employee reasonably finds continued employment to be intolerable, there will, in my view, be constructive dismissal whether or not the employee purports to resign.
An employer owes a duty to its employees to treat them fairly, with civility, decency, respect and dignity. An employer who subjects employees to treatment that renders competent performance of their work impossible or continued employment intolerable exposes itself to an action for constructive dismissal. Where the employers’ treatment of the employee is of sufficient severity and effect, it will be characterized as an unjustified repudiation of the employment contract. Whether such treatment is viewed as a breach of a specified fundamental implied term of the employment relationship (see, for example, Lloyd v. Imperial Parking Ltd.,  A.J. No. 1087 (Q.B.), and Sheppard v. Sobeys Inc.,  N.J. No. 78 (C.A.)), or as a repudiation of the entire employment relationship (see Shah v. Xerox Canada Ltd.,  O.J. No. 849 (C.A.)), the result is the same. The employee is entitled to treat the employment contract as at an end, and to recover at least damages in lieu of reasonable notice.
…an employer owes a duty “to see that the work atmosphere is conducive to the well being of its employees.” An employer’s failure to prevent the harassment of an employee by co-employees is an obvious breach of this duty, and has been held to be capable of amounting to constructive dismissal.
In Cooke v. HTS Engineering Ltd.16 a female employee was found to have been constructively dismissed because she had been bullied and psychologically harassed by being called disparaging names and belittled by her supervisor. The court did not accept the female employee’s allegations of sexual harassment.
I must also consider that victims of abuse, be it in the workplace or elsewhere, are often reticent to report that the abuse has taken place. This can be for any number of reasons including embarrassment, fear of consequences, self-doubt, power imbalance and hope that it will resolve. In this case, Ms. Cooke indicated her fear of losing her job and her embarrassment of the circumstances of her workplace. I cannot say that her failure to report the unwelcome conduct of Mr. Comeau was in breach of the employment contract or should act to nullify or reduce the veracity of her claim in any way.
It is normal in an employer/employee relationship to discuss work performance frankly and openly, and a failure to do so can inhibit the performance of both the employer and employee. In this case, I find there was nothing untoward in the conduct of the plaintiff or its employees towards the defendant and, as a result there are no facts that justified the defendant terminating the contract of employment on the grounds that a productive working relationship was prohibited between the parties. The plaintiff was entitled to direct the defendant’s efforts into the area that it thought would benefit the plaintiff and was entitled to criticize the defendant if she did not meet the plaintiff’s reasonable expectations. The defendant withdrew her services for no good reason, either contractual or medical, and is therefore in breach of the agreement.
The determination of whether an employee who has been instructed by her employer to transfer to another geographic location is a fundamental breach of the employee’s employment contract depends on a number of factors including the specifics of any proposed geographic transfer and whether the employee’s employment contract contains an express or implied term of employment that allows the employee’s to be transferred. The more distant the relocation (particularly if the transfer is to another country), the more likely a constructive dismissal will be found. The court, when deciding whether the employment contract contains an implied (i.e. unwritten) term allowing geographic transfers will consider, amongst other things, the nature of the business and the position held by the employee in order to attempt to determine the intentions of the parties at the time the employment contract was formed. For example, a senior executive of a multinational company is more likely to have an implied term in his more her employment contract requiring relocation than a more junior clerical worker, particular if it is common for company executives to be transferred between various parts of the corporate group.
In Wilson v. UBS Securities Canada Inc.18 an equity trader was found to have been constructively dismissed when she was required to relocate from Vancouver to San Francisco. The Court found that the plaintiff’s employment contract did not contain an express or implied contractual term that allowed the company to transfer the employee’s employment to San Francisco. When the employee had joined the company there was not an expectation that an employee would be transferred.
The present case differs materially from those cited by counsel for UBS Securities. It is not a case in which the requirement to move was raised with the employee at the time of hiring or subsequently in the course of any performance review or planning procedure: Holgate v. Bank of Nova Scotia, reflex,  27 C.C.E.L. 201 (Sask. Q.B.); nor a case in which the employee had accepted prior transfers: Reber v. Lloyds Bank International Canada 1985 CanLII 153 (BC CA), (1985), 18 D.L.R. (4th) 122 (B.C.C.A.), Jim Pattison Industries Ltd. v. Page,  S.J. No. 448 (C.A.), Durrant v. Westeel-Rosco Ltd. 1978 CanLII 277 (BC SC), (1978), 7 B.C.L.R. 14; nor a case in which the employer faced financial difficulties compelling consolidation or restructuring: Smith v. Viking Helicopter Ltd. reflex, (1989), 68 O.R. (2d) 228, Morris v. International Harvester Canada Ltd. reflex, (1984), 7 C.C.E.L. 300; nor a case in which the employer was attempting to accommodate an employee who was no longer able to perform at a level required of the position in which the individual was employed: Canadian Bechtel Ltd. v. Mollenkopf (1978), 1 C.C.E.L. 95, and Marko v. Toromont Industries Ltd.,  O.J. 5539 (QL) (Gen. Div.); nor a case in which it could reasonably be expected that transfer would be a fact of life as was the case in Stefaovic v. SNC Inc., reflex,  22 C.C.E.L. 82 (Ont. H.C.) where a move should have been reasonably anticipated upon completion of an engineering project at a specific geographical location.
In Brown v. Pronghorn Controls Ltd.19 the Alberta Court of Appeal upheld a decision of the trial judge that found that the employer’s offer to relocate the employee to another office located a two-hour drive from his current location did not result in the constructive dismissal of the employee. The company had offered the employee relocation assistance. The trial judge made a finding of fact that the employee had made it clear to the employer that he was prepared to relocate location to advance his career. Moreover, the judge found that the decision of the employer to transfer the employee to another location was made for legitimate business reasons.
In the 2018 decision Hagholm v Coreiro20 the judge found that a a 59 year old Manager of Consulting Services who for 22 years had been able to work at home 3 out of 5 days per week had been constructively dismissed after, out of the blue, the employer ordered the employee to work in the office 5 days a week. Her commute was 110 km one way.
The practical problem faced by an employee who has not been paid his or her wages is that, if the employer’s failure to pay wages coincides with the employer becoming insolvent or bankrupt, the constructively dismissed employee may not be able to recover any notice and severance payments owed. This is because the employee would be classified as an unsecured creditor for any claims made for pay in lieu of reasonable notice at common law (i.e. termination pay). The employee would, however, have a greater chance of recovering his or her unpaid wages. Both s. 81 of the Ontario Employment Standards Act, 200022(“ESA”) and s. 131 of the Ontario Corporations Act23 impose personal liability on corporate directors for unpaid employee wages, subject to certain conditions.
Employers in Ontario often mistakenly believe that they have the right to temporarily layoff a non-unionized employee for either economic or disciplinary reasons. This mistaken belief may be because the right to layoff is common in most unionized environments and the fact that the right to temporarily layoff is also set out in section 54(2) the ESA, which provides that an employer may to temporarily layoff an employee for up to 20 weeks without triggering the ESA’s termination provisions.
However, at common law, a layoff is a constructive dismissal even if the employer intends to recall the employee at a future date. The ESA does not supersede the common law in circumstances where the common law provides a greater right or benefit than the ESA. This statement of law was confirmed by the 1997 and 2015 Ontario Court of Appeal decisions in Stolze v Addario24 and Motion Industries (Canada) Inc. v. McCarthy.25 The Court held that if a lay-off — be it temporary or indefinite — constitutes a repudiation of the fundamental terms of the employment contract, then the laid off employee has been constructively dismissed.
Therefore, in a non-unionized environment, the presumption that a layoff will trigger a constructive dismissal will only be rebutted if the employee’s employment contract implicitly or explicitly recognizes the employer’s right to layoff the employee. It should be noted that, based on the Ontario Court of Appeal’s decision in Elsegood v. Cambridge Spring Service,26 any clause in an employment contract that provides the employer the right to layoff an employee for a period of more than 35 weeks is likely to be found to be a breach of s. 56(1) of the ESA and, therefore, void and unenforceable.
Given the absence of a specific agreement between the parties regarding employer-initiated suspensions, the issue before the trial judge was whether an implied term authorizing unpaid suspensions should be read into the employment relationship between the parties. The trial judge concluded that it should not. In our opinion, he did not err in so holding.
This is not to say that there cannot be lesser sanctions for less serious types of misconduct. For example, an employer may be justified in docking an employee’s pay for any loss incurred by a minor misuse of company property. This is one of several disciplinary measures an employer may take in these circumstances.
However, the lower courts have not, to date, appear to have followed this particular obiter comment of the Supreme Court of Canada.
An employer does have the right to impose a suspension if it has just cause to dismiss the employee. The suspension will be a lesser form of punishment. As noted by Justice Goepel in Vernon v. British Columbia (Liquor Distribution Branch)29 at paragraph 349 a constructive dismissal action is doomed to fail if the employer has cause to dismiss the employee.
In my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA.
Moore J. ultimately awarded the laid off plaintiff damages for wrongful dismissal finding that the layoff had not been rolled out in accordance with the ESA and, therefore, did not qualify under the temporary layoff provisions of the ESA. Nevertheless, the judge’s statement with respect to the inability of an employee to claim he or she has been constructively dismissed if laid off in accordance with the terms of the ESA appear to be directly at odds with the binding authority of the Ontario Court of Appeal’s decision in Stolze. In this regard, it is significant that Moore J. did not reference Stolze. Time will tell if Trites will influence the development of the common law or whether the decision will simply be considered an outlier.
An employer’s failure to provide sufficient working notice of dismissal (or a combination of working notice and severance) to an employee may constitute the constructive dismissal of the employee. Whether the working notice provided is so insufficient that it actually triggers a constructive dismissal is a question of fact to be decided by the court.
In Giza v. Sechelt School Bus Service Ltd.32 the British Columbia Court of Appeal considered the legal effect of an employer’s termination of an employee’s contract of employment with inadequate notice. The plaintiff was 62 years old and had 5 years of service as a bus driver with the company. His employer informed him that he was being provided with 5 weeks working notice that it was terminating his contract of employment. The plaintiff, rather than continue to work through his notice period and, at its conclusion, commenced a claim for wrongful dismissal, immediately resigned from his employment. The trial judge found that the employer, contrary to allegations made by the plaintiff, had not acted in bad faith during the dismissal.
Provision of inadequate notice may constitute repudiation of the contract. Whether it does or not is a question of fact, to be resolved on the evidence of the circumstances accompanying the provision of the notice.
Chiasson J. referenced the fact that the trial judge had held that the employer’s conduct did not constitute constructive dismissal and that the Court of Appeal must give deference to that finding of fact. The Court found that the employee’s reasonable notice period was 6 months but deducted 1 month because the employee refused to work during the 5 week notice period provided by the employer.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.