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Constructive Dismissal: I Appeal

  • Image: Banana peeled by richard_north. This image was marked with a CC BY 2.0 license.

My son recently came home with a joke, “What did the banana say to the judge?” First, let’s look at a 2015 Supreme Court of Canada constructive dismissal decision.

In Potter v. New Brunswick Legal Aid Services Commission, the Supreme Court of Canada overturned lower court rulings and decided the employer constructively dismissed Mr. Potter.

David Potter was a lawyer. He was the Executive Director of the New Brunswick Legal Aid Services Commission.

He was to be Executive Director for seven years. In the first half of that term, the relationship between the parties deteriorated. 

They began negotiating buying out his employment contract.  

Mr. Potter took sick leave.

The Commission advised him he was administratively suspended, indefinitely, with pay. It did not tell him why. Someone else performed his duties. 

Unbeknownst to him, it was also taking steps to dismiss him for cause. Just in case negotiations fell through.

Mr. Potter claimed he was constructively dismissed. He commenced litigation.

The Commission said commencing litigation amounted to a resignation.  So, it offered him no severance.

The trial judge decided against Mr. Potter.

So did the Court of Appeal.  

He sought leave (permission) from the Supreme Court of Canada to hear his case.

It heard his case, and allowed his appeal.

In so doing, it clarified the law on constructive dismissal.

Two Branches of Constructive Dismissal

There are two types of constructive dismissal. 

The first is when an employer breaches an essential term of the employment contract.   

The second is when an employer engages in conduct over time that, taken together, more generally shows that it does not intend to be bound by the employment contract.   

1. Constructive Dismissal by Employer's Breach of Contract

To determine if the first type of constructive dismissal has occurred, the analysis has two steps. 

The first step is to determine if the employer has breached an express or implied term of the employment contract.   

Implied terms are contractual terms that the parties have not expressly written into the contract, but are there by operation of law. The law implies certain basic terms to be present.  

One example of a term implied into all employment contracts is a requirement that employers will conduct themselves in good faith and deal fairly with employees, including at the time of dismissal.

An employer’s attempt to unilaterally change an important term of the employment contract, which is detrimental to the employee, can amount to this type of constructive dismissal.

However, if the contract authorizes the change, or the employee consents to or acquiesces in it, then the change will not breach the contract and will not be constructive dismissal.

The second step is to determine if that breach substantially altered an essential term of the contract.  

At this stage, the court must ask whether, at the time of the breach, a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed.

Where an employer suspends an employee, the burden shifts to the employer to show that the suspension is reasonable or justified.

2. Constructive Dismissal by Employer's Conduct Showing Intention Not to be Bound

The other way an employee can be constructively dismissed is if the employer has treated the employee in such a way as to make continued employment intolerable.

Attempts to force someone’s resignation falls within this category.

For this type of constructive dismissal, it is not necessary to identify a specific contractual term that is breached.

This type of constructive dismissal was recently established in the Supreme Court of Canada’s recent decision in Matthews v. Ocean, which was discussed recently in this column.  

Supreme Court of Canada's Decision

In Potter, the Court found that the Commission had an obligation to provide Mr. Potter with work.  

Even if the Commission had an implied authority to relieve Mr. Potter of some or all of his duties, any such authority was not unfettered.

The Court held that Mr. Potter had proven that the Commission’s unilateral act breached his employment contract and that the breach substantially changed the essential terms of the contract.

He was constructively dismissed and therefore entitled to damages for wrongful dismissal for the duration of his term. 

Due to his age, had no obligation to mitigate.

Pension benefits were not to be deducted from his wrongful dismissal award.

And So…

Potter illustrates that employers must approach suspensions with care.  

It also illustrates that sometimes, it may be worth the time, expense and emotional anguish to appeal. 

Employees in Canada can be grateful that our top court understands the injustices that exist within employment relationships.

Sometimes, if a court has ruled against you, it may be worth your while to say what the banana said to the judge:

“I a-peel”

This is a modified version of a November 8, 2020 article appearing in online publications including the Kelowna Capital News. The content of this article is intended to provide very general thoughts and general information, not to provide legal advice. Advice from an experienced legal professional should be sought about your specific circumstances.  We may be reached through our website at inspirelaw.ca