Constructive dismissal

Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10:

                    The test for constructive dismissal has two branches. The court must first identify an express or implied contract term that has been breached and then determine whether that breach was sufficiently serious to constitute constructive dismissal. However, an employer's conduct will also constitute constructive dismissal if it more generally shows that the employer intended not to be bound by the contract. This approach is necessarily retrospective, as it requires consideration of the cumulative effect of past acts by the employer and the determination of whether those acts evinced an intention no longer to be bound by the contract. Given that employment contracts are dynamic in comparison with commercial contracts, courts have properly taken a flexible approach in determining whether the employer's conduct evinced an intention no longer to be bound by the contract.

                    The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps:  first, the employer's unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract. For that second step of the analysis, the court must ask whether, at the time that the breach occurred, 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. In determining this, a court must not consider evidence consisting of information that was neither known to the employee nor reasonably foreseeable. 

                    Constructive dismissal can take two forms:  that of a single unilateral act that breaches an essential term of the contract, or that of a series of acts that, taken together, show that the employer intended to no longer be bound by the contract. In all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrative suspension is at issue, the burden will necessarily shift to the employer, which must then show that the suspension is reasonable or justified. If the employer cannot do so, a breach will have been established, and the burden will shift back to the employee at the second step of the analysis.

                    A finding of constructive dismissal does not require a formal termination, but a unilateral act by the employer to substantially change the contract of employment. In this case, the Commission was P's employer for most purposes, although the Crown was his employer for the purposes of appointment, reappointment and termination. In other words, the Commission had the power to substantially change P's contract, and thus to constructively dismiss him.