Constructive Dismissal – Employment Law

Date: 28 May, 2015| Author: Fred Streiman

The Supreme Court of Canada on March 6th, 2015, clarified the law of of wrongful dismissal in the decision of Potter v. New Brunswick Legal Aid Services Commission.

In this case the Board of Directors of the Legal Aid Commission had decided to get rid of its executive director.  While Potter was on sick leave, he was, without any reason, told not to return to work though he would continue to be paid.  After six weeks of not being asked to return, he sued for wrongful dismissal.

The question was, has he been constructively dismissed?  In other words, were the steps and actions taken by his employer, the same as being fired without cause which would give grounds to bring an action for wrongful dismissal?

The court found that he had been constructively dismissed and damages were awarded.

The court found that being paid is not the only benefit of working.  There are other benefits and rewards one receives for working and the court found that removing the benefits derived from performing work amounted to a substantial change in Potter’s employment and in turn, justified a finding of constructive dismissal.

What is the test for constructive dismissal?  (Sorry this is a little technical)

  1. Is the employer’s unilateral change a breach of an express or implied term of the employment contract and if so did the employer substantially alter this essential term of the employment contract?  One must remember that if there is an express or implied term (and most one sided employment contracts do contain this authority), that the employer may make unilateral changes OR if the employee consents, in other words simply goes along and accepts the change, the employee will be found to have agreed and therefore the change is no longer unilateral.  If it is not unilateral, in other words one sided, there is no longer a breach of a contract of employment and as such there is no constructive dismissal.  The change must be detrimental or substantial to the employee.  The court must ask at the time the breach occurred, would a reasonable person in the same situation as the employee, have felt that the essential terms of the contract were being substantially changed?  A minor change is not constructive dismissal.  It does not take a genius to recognize that every case is different and depends upon its individual facts.
  1. Another test as to whether or not constructive dismissal exists is whether the employer intended not to be bound by the contract.  This is an examination of the behaviour of the employer towards the employee.  Is there is a course of conduct pursued by the employer that shows that it had no intention to continue to be bound by an existing employment contract.   An employment contract can simply be an oral or implied one by virtue of the fact that you have been hired.  Alternatively, an employment contract can be a very specific written one.

The court lent much weight to the fact that no explanation or reasonableness was extended to Potter.  Potter was never explained why he was suspended or what indeed was the employer’s intention.  No employer is at liberty to withhold work from an employee either in bad faith or without justification.  An employer cannot suspend an employee without telling them why.  Employers have to show legitimate business reasons.  In essence, the employer must act in good faith which means being honest, reasonable and candid.  Here Potter asked why but was only met with silence.  A deadly step to be taken by an employer.

The court did add some comfort to employers.  If an employee pulls the trigger and fails in his/her claim of constructive dismissal, the employee almost always will be found to have voluntarily quit.  A claim for constructive dismissal is not a simple one and should never be attempted by a person without the benefit of advice from an experienced lawyer in this area.