Constructive Dismissal

Brunswick News Inc. v. Sears, 2012 CanLII 42254 is a recent and useful case outlining the law regarding constructive dismissal:


Constructive Dismissal

[9] Whether or not there is a constructive dismissal is a question of fact and a finding on point attracts great deference on appeal. Constructive dismissal is explained in Canadian Pacific v. Dick, 2000 NBCA 10 (CanLII)  2000 NBCA 10, 230 N.B.R. (2d) 39:

InFarber v. Royal Trust Co., 1997 CanLII 387 (SCC)  , [1997] 1 S.C.R. 846, at pp. 864-65, Justice Gonthier, who delivered the judgment of the Court, expresses the view that the following statement accurately defines the common law concept of constructive dismissal:

A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee. Such action amounts to a repudiation of the contract of employment by the employer whether or not he intended to continue the employment relationship. Therefore, the employee can treat the contract as wrongfully terminated and resign which, in turn, gives rise to an obligation on the employer's part to provide damages in lieu of reasonable notice.

That statement was authored by Justice N.W. Sherstobitoff of the Saskatchewan Court of Appeal. See his article entitled "Constructive Dismissal" in B.D. Bruce, ed., Work, Unemployment and Justice (Montreal: Thémis, 1994) 127, at p. 129. Since Farber v. Royal Trust Co., Justice Sherstobitoff's definition has been used regularly by our courts as the starting point for the consideration and disposition of claims based on allegations of constructive dismissal.

It is commonplace that whether an employee has been constructively dismissed is essentially a question of fact. The court must determine whether on a reasonable interpretation of the facts, the employee has established that he was constructively dismissed as a result of conduct by the employer that breaches a fundamental or essential term of the employment contract. See Smith v. Viking Helicopter Ltd.  , (1989), 24 C.C.E.L. 113 (Ont. C.A.), per Finlayson J.A., for the Court, at pp. 116-17 and Saint John Shipbuilding Ltd. v. Snyders 1989 CanLII 210 (NB CA)  , (1989), 100 N.B.R. (2d) 14 (C.A.), at p. 22. The employee's perception of the employer's conduct is not determinative. Rather, the court must ask whether a reasonable person in the same situation as the employee would have concluded that an essential term of the employment contract had been substantially changed by the employer. See Saint John Shipbuilding Ltd. v. Snyders and Brennan v. Henley Publishing Ltd. 1997 CanLII 11512 (NB CA) , (1997), 188 N.B.R. (2d) 338 (C.A.), at p. 341.

A wide array of unilateral modifications to the employment relationship brought about by the employer may, if sufficiently significant, be treated by the employee as wrongfully terminating the employment contract. Most commonly, the event giving rise to an allegation of constructive dismissal is a substantial modification to an employee's remuneration package or a demotion. Dickinson v. Connell Chrysler Ltd., [2000] N.B.J. No. 157 (Q.B., Russell J.), online: Quicklaw (NBJ), Lynch v. Carter (Mac) Ltd. 1995 CanLII 4127 (NB QB) , (1995), 169 N.B.R. (2d) 202 (Q.B., Russell J.), Brennan v. Henley Publishing Ltd. and Perkins v. Saint John Shipbuilding Ltd. , (1989), 92 N.B.R. (2d) 344 (C.A.) are examples of the former. Johnson v. Moncton Chrysler Dodge (1980) Ltd.  , (1990), 104 N.B.R. (2d) 315 (Q.B., Landry J.), varied at 1991 CanLII 2717 (NB CA)  , (1991), 114 N.B.R. (2d) 192 (C.A.), Duplessis v. Irving Pulp & Paper Limited, J.D. Irving Limited and Irving (1983), 47 N.B.R. (2d) 11 (C.A.), and Sherrard v. Moncton Chrysler Dodge (1980) Ltd.  , (1990), 104 N.B.R. (2d) 334 (Q.B., Landry J.), aff'd 1990 CanLII 2610 (NB CA)  , (1990), 113 N.B.R. (2d) 355 (C.A.) are examples of the latter. [paras. 33-36]


[10] In David Harris, Wrongful Dismissal, looseleaf (Toronto: Thomson Carswell, 1989), the author discusses modifications to the employment contract that can lead to repudiation:

The underlying consideration in an employment contract is the exchange of service from the employee for remuneration from the employer. A unilateral alteration in the terms of remuneration can constitute "a repudiation of the whole bargain".

A substantial cut in salary or the discontinuance of a bonus (if it has become part of the employment contract) will generally amount to constructive dismissal. A reduction in benefits may have the same effect. The question is, what type of reduction in pay or benefits will be construed as "substantial"?

[...]

Other types of changes in remuneration which have been held to support constructive dismissal include modifications of commission structure (whether or not it resulted in impaired earning power) and a job reclassification that "froze" the employee's wages. [§3.3B, pp. 3-32.45 - 3.32-46]

The plaintiff brought this passage to the motion judge's attention in his pre-hearing brief.