LABOUR & EMPLOYMENT
The intricacies of constructive dismissal Employer should have offered new position a second time to long-term employee BY JENNIF ER BROWN
nternal "restructuring" is often a [packages] are going this route and hop ing a long-term employee and senior means organizations use to adjust ing the person won't stay;' says Hen executive of a transportation company to market forces these days, but it drik Nieuwland, partner with Shields brought the question ofconstructive dis can come with its own set ofrisks . O'Donnell MacKillop LLP. missal to light again. In Farwell 1( Citair Whether it's a pay cut, change in Constructive dismissal occurs when Inc. (General Coach Canada) the com title, or demotion of duties, employees an employer makes a unilateral and pany learned the hard way the delicate are watching for signals indicating they fundamental change to a condition of dance required when making changes may have been constructively dismissed. an employment contract without pro to an employee's role. It decided its ~ "Employers who want to make changes viding reasonable notice. 58-year-old vice president of operations ~ but don't want to pay out big severance Earlier this spring, a case involv- with 38 years at the company, lacked the ~
38 SEPTEMBER 2014 """· ( A~A D I A~ Law ye rmag.com expertise it needed fo r its new product duty to mitigate losses. able to argue they were constructively lines and offered VP Kenneth Farwell Thomas Gorsky, a law)'er with labour dismissed, even if the)' are paid the same the position of purchasing manager - a and employment boutique Sherrard amount of money, if their status in the job he had previously held - with his Kuzz LLP, says there is a two-stage analy company changes. current position going to a subordinate sis in man)' constructive dismissals; the In man)' cases there is also a sec with more expertise in new products the first being the question of whether a par ond stage in the anal)'sis as to whether, company needed to push forward to be ticular incident constitutes a construc given a person has been constructively competitive. Farwell would continue to tive dismissal to begin with. It's also not dismissed, he or she still has an obli receive the same salary he had as a VP, just about the money. Employees ma)' be gation to mitigate the loss by making but in the purchasing manager role. The only difference in compensation might be a reduction in the bonus he had pre viously received. Farwell viewed it as a demotion and turned down the purchasing manager job - one that would require him to report to someone who once reported to him. He also launched a lawsuit claiming he was constructively dis missed. At trial, the judge agreed the legal test The Osgoode Certificate in for constructive dismissal had been met but that didn't mean he was automati Labour Law cally entitled to a legal remedy. Farwell had a potential duty to mitigate his own Learn from a "who's who" of more than 20 experts from losses by taking the position General management, union and government as they explore the Coach offered him through a period of key concepts of labour law. "reasonable notice." This was based on established law that even for employ Module 1· January 27. 2015 Labour Law foundations ees held to have been constructively terminated, they may, in some cases, Module 2 • February 3. 2015 Collective Bargaining be required to remain working as an aspect of their obligations to mitigate Module 3 · February 10. 2015 Grievance Arbitration: Protecting Rights and Resolving Conflicts their losses. Justice Johanne Morissette held Far Module 4 • February 17. 2015 Workplace Investigations in a Unionized Environment well didn't have an obligation to mitigate his damages to accept the purchasing Module S · February 25, 2015 Restructuring Unionized Environments/The Law of Industrial Conflict manager's job as it would be "humil iating and embarrassing" for him to take the demotion. Based on Farwell's Proqram Director Req:istration f'ee John D.R. Cralq $3,995 plus HST age and 38 years of experience, he was Fasken Martineau Ou~Aoulin LLP Public Sector Rate: $3495 plus HST awarded payment of the equivalent of Assistant Proff!ssor. Faculty of Law Inquire about financial aid and 24-months wages in lieu of notice. Un iversltv of ~Vestern Ontario group discounts. General Coach appealed to the Oates Location January 27 • February 25. 2015 Osgoode Professional Development Ontario Court of Appeal on the basis 5 DayS over 5 Weeks 1Dunda s St W.. 26th Floor the trial judge erred in applying a sub Toronto, ON MSG 1Z3 jective test as to what was in Farwell's mind, rather than applying the legally To Reqlster: www.osgoodepd.ca; Or Call: 416.597.9724 or 1.888.923.3394 c~ Or E.. mai l: opd·[email protected] required objective test. Essentially, the court said if an employee rejects the offer of continued employment and A WORLD LEADER IN LAV.' OSGOODE asserts a constructive dismissal claim, SCHOOL LIFELONG LEARNING ...... I l'ltOJtS~oOOU. X9.~ .~ •• Cit • 9•N I 'f I 1.11 ! '1 1,S l r" ~ an employer nn u;t re-offer the new posi Priority Service Code: t4· 4 1CL tion offered to invoke at1 employee's
www. CANADIAN Law ye rmag.com SEPTEMBER 201 4 39 LABOUR & EMPLOYMENT
reasonable attempts to find employ ther in Farwell by saying a company ment, says Gorsky. "So sometimes when can't e>.'j)ect the employee to understand you have a constructive dismissal inci they have to stay in the job to mitigate dent like this where there is a demo their loss - the employer must extend tion, there can still be a consideration the offer of continuing employment to as to whether the employee should not them again and make it clear it's being just leave work and pursue a claim extended even though they are claim but should remain in employment and ing they have been constructively dis search for alternative employment dur missed. If that happens, the employee ing that process if they want to. But may be obliged to mitigate his or her it would be part of the obligation to loss by staying in the job even though mitigate - to stay in the job - and earn they are claiming to have been construc income rather than simply departing:• tively dismissed. Farwell left General Coach and the So what is Gorsky's advice to employ company felt he should have stayed ers? "It is such an intricate and confusing in the job while he was looking for area with the double obligation;• he says. a new one. Gorsky says that think "There is so much involved contextually ing goe.s back to an Ontario Court of - consider the degree to which you're Appeal case called Mifsud v. M11cMillan asking for a change to be made in their job Bathurst Inc., which held a reasonable and you can make a case that it's reason person should continue in his job not able for the employee to accept the change withstanding constructive dismissal. In still have obligations to mitigate their to begin with in terms of the construe - that case, the Ontario Court of Appeal loss by remaining in the job. tive dismissal analysis, or. alternatively to accepted the proposition that employees The Ontario Court ofAppeal appears remain in the workplace as part of the who are constructively terminated can to have clarified that obligation fur- employee's mitigation obligation:·
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40 SEPTEMBER 2014 """ (A~ADIA~ lawyermag.com "There is so much involved contextually - consider the degree to which you're asking for a change to be made in their job and you can make a case that it's reasonable for the employee to accept the change to begin with in terms of the constructive dismissal analysis, or, alternatively to remain in the workplace as part of the employee's mitigation obligation." THOMAS GORSKY, Sherrard Kull LLP
Increasingly. employees are more sensitized to their rights have taken the job to make sure you have no damages:• he says. and potential liabilities and are more likely to question actions His advice to employers is to always do what's right for the taken by an employer than they used to. By the same token, business. "If keeping the person is best for the business, then Gorsky says most employers have become more aware that if you offer the alternative position, but if doing that is not best they are doing something that constitutes a significant altera· for the business, I'm hesitant to recommend doing so just for lion to the employment relationship they can't automatically positioning purposes in a constructive dismissal claim:· assume they can do it. Over time, Nieuwland says it is likely there will be a con· Ever since Evans v. Teamsters Union local No. 31 in 2008, tinued level of constructive dismissal claims, perhaps driven there's been "a fairly steady diet of people thinking about how in the near term by the aging workforce. "As workers get older to make changes and avoid the constructive dismissal clain1s;• and because of their age they may have a diminishment ofskil l says Craig Neuman, of Neuman Thompson in Edmonton. set, and so companie.s look to realign these people and make "If they can't convince a court the new job they are offering changes to jobs. So they run the risk of constructive dismissal is close enough to the old job to circumvent liability entirely. claims with an age discrinlination clainl tacked on:• ti! at least they are thinking. 'How can we keep it down to a dull roar?' \•Ve are running into it with reasonable regularity." Evans was a wrongful dismissal case, not a constructive dismissal case, but the Supreme Court of Canada held the mitigation principle applied to both express and constructive KU RETZ KY dismissals. Donald Norman Evans worked for the Teamsters and experienced a job change that led to a wrongful dismissal VASSOS claim. They offered to have him come back and work for a period of time but he declined. The courts said he should have HENDERSON LLP mitigated his loss. "We have spent quite a bit of time caution· ing clients that if they want to use the approach then they have to be sensitive to the notion surrounding respectful communi· COll[ CTI~[ MRG!
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