Wrongful dismissal, constructive dismissal and their remedies

September 20, 2012

What is a wrongful dismissal? The question looks simple, but is not. Most people would take its meaning by letters, and think the term simply means being dismissed wrongfully. But in Canada (as in most other countries) where freedom to contract is valued, termination of employment relationship by either the employer or employee is not wrong in itself: either party has the freedom to do so.

In employment law, wrongful dismissal cases do not usually deal with the cause of dismissal. The focal point is whether the notice of termination given by one party is sufficient and fair, and the remedy if the notice is not sufficient.

The determination of the fair and sufficient notice is very much a fact driven exercise, that is, depending on all the specific circumstances of each case. In Canada, most provinces have employment standards acts, which specify the minimum notice required for termination of employment. If a matter is taken to the court, the fair notice period will be determined by case law, and it is almost guaranteed that a longer notice period will be found for the employee. If the employer did not give sufficient notice to the employee, the latter will be given all the compensation and benefits as if they were employed during the whole notice period determined by the court.

Although the cause of the termination is not the central issue in most wrongful dismissal cases, it is important in some cases. Sometimes the employer dismissed an employee in bad faith, and sometimes the employer’s conduct infringed upon the employee’s human rights. All this can be aggravating factors which may lead to higher amount awarded to the employee, or even separate lawsuit.

Constructive dismissal

The cause of termination is of central importance in what we call “constructive dismissal” cases. In such cases, an employee would leave the job due to a unilateral change to the terms of the employment they did not accept. A classic example of such changes is a reduction of the employee’s compensation. However, more subtle changes, such as a change to the employee’s duties, responsibilities or position (normally a demotion), may trigger the claim of constructive dismissal.

In Piron v. Dominion Masonry, the judge in British Columbia ruled that a unilateral change to an employee’s bonus was constructive dismissal. In the case the plaintiff was a 44 year old masonry foreman who had worked for his employer for 19 years. He was a mason at the beginning and became a foreman a few years later. He had earned significant bonuses over the years, depending on the size and complexity of the projects. However, with the downturn of the economy, the employer reduced the bonus, which the plaintiff did not accept. Before the court, despite the employer’s argument that the bonus was discretionary, and the fact that the bonus varied widely from year to year, it was found the termination constituted constructive dismissal.

In another recent case, St-Hilaire c. Nexxlink inc., the claim for constructive dismissal is rejected. The plaintiff In this case was a vice-president at Nexxlink, which was later sold to Bell. Certain aspects of Mr. St-Hilaire’s employment contract were then changed, including his title, some of his responsibilities and remuneration methods. St-Hilaire left the job, and later claimed more than $500,000 in damages.

In upholding the Superior Court’s rejection of the plaintiff’s claim, the Court of Appeal reviewed the elements required for the finding of constructive dismissal:

  1. a unilateral decision by the employer;
  2. a substantial modification of the essential terms of the employment contract;
  3. the employee’s refusal of the said modification; and
  4. the departure of the employee.

The Court of Appeal confirmed that an employer can modify an employee’s terms of employment if the employment contract allows for it or if the employee agrees to it. Further, the court confirmed that the employment contract is not stagnant and must allow for a certain amount of flexibility to adjust to new situations. However, all circumstances of a case must be considered in determining whether the employer’s unilateral change of the terms of employment is legitimate or not.

The line between a constructive dismissal or the otherwise “rightful” dismissal is murky. There is no objective standard, and the legal issues and argument involved are oftentimes complex. If your job duties, position or remuneration are changed and you do not agree to it, you should talk to your employer to have your original terms of employment restored. If this does not succeed, you should consult an employment lawyer to see if you have a case. If constructive dismissal is found, you will be entitled to a substantial severance package.

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