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Ontario Court Rules that ESA Temporary Layoff may still Result in Constructive Dismissal

An Ontario Court has ruled in Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 that even in cases where an employer has complied with the temporary layoff provisions of the Employment Standards Act, 2000 (the “Act”), the layoff does not protect the employer from a successful claim in constructive dismissal by the employee at common law. In the case, a 15 year Facilities Manager was told by his employer that he was being temporarily laid off and that he would be recalled in three months. His company benefits were continued during the layoff period. While the layoff was done in accordance with the Act, the employee immediately took the position that he had been effectively terminated when he was placed on layoff. The Court agreed with the employee, and held that absent a provision in the employee’s employment contract allowing for a temporary layoff, a unilateral layoff constituted a constructive dismissal, regardless of whether it was done in compliance with the Act. The employee in the case, who was unemployed for 15 months after he was placed on layoff, was less successful with the remedy that the Court ordered. The employee was entitled to be paid for the three months he was on layoff, but the Court found that he had failed to mitigate his damages when he declined the employer’s offer to return to his old job after the layoff period was over.

Employers who wish to place employees on unpaid layoff should use this case as a reminder to update their employment agreements to provide for the right to unilaterally impose temporary layoffs in accordance with the Employment Standards Act, 2000 without further notice or compensation.

To view the decision, click here: http://www.canlii.org/en/on/onsc/doc/2016/2016onsc4127/2016onsc4127.html.

 

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Ontario Court Rules that ESA Temporary Layoff may still Result in Constructive Dismissal

Sale of a Business is Not Constructive Dismissal

In the decision 2108805 Ontario Inc. v. Boulad[1] rendered on January 25, 2016, the Quebec Court of Appeal overruled the trial judge who had considered that the change of employer resulting from a change of ownership constituted a unilateral and substantial modification of Mr. Boulad’s essential terms and conditions of employment and therefore awarded him an indemnity in lieu of notice of termination of employment equivalent to 24 months of salary and benefits.

Mr. Boulad was director of a hotel owned by the Westmount Hospitality Group (“Westmount“) an important international hotel group. Westmount sold the hotel for which Mr. Boulad was responsible to Jesta, a much smaller hotel group.  Pursuant to the transaction and to section 2097 of the Civil Code of Quebec (“CCQ“), Jesta undertook to continue Mr. Boulad’s employment under the same terms and conditions of employment.  Mr. Boulad refused to pursue employment with Jesta and asked Westmount to relocate him at another hotel or pay him a severance package.  Westmount denied Mr. Boulad’s request as it considered his employment was being continued with Jesta pursuant to section 2097 CCQ.  Mr. Boulad sued Westmount claiming that the change of employer amounted to a constructive dismissal, namely considering the loss of prestige associated with his employment with an important hotel group and the loss of transfer and promotion opportunities at the international level.

In its decision, the Court of Appeal confirmed the imperative and declaratory nature of section 2097 CCQ which stipulates that the employment contract continues to be in force and binding following the alienation of an enterprise.

The change of employer shall not be considered a substantial modification of the essential terms and conditions of employment for the sole reason that the new employer becomes the debtor of the previous employer’s obligations. The Court of Appeal also acknowledged that a business is not static and may evolve through time.  The workplace atmosphere and environment, as well as transfer and promotion opportunities are generally not part of the terms and conditions of employment unless expressly stipulated in the employment contract. In this particular case, the evidence fell short from demonstrating that Westmount and Mr. Boulad had agreed to such considerations being part of the terms and conditions of employment.  Both Westmount and Jesta abided by their legal obligations pursuant to section 2097 CCQ and Mr. Boulad could not legally or contractually require Westmount to relocate him or pay him severance. Mr. Boulad’s refusal to work for Jesta therefore constituted a voluntary resignation.

Accordingly, an employee who does not wish to continue employment with a successor employer may resign from employment but will have no recourse against the vendor or the purchaser, subject to specific undertakings in the employment agreement.

[1] 2016 QCCA 75.

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Sale of a Business is Not Constructive Dismissal

SCC Says Suspension with Pay can Amount to Constructive Dismissal

A non-unionized employee on an indefinite suspension with pay successfully claimed that he was constructively dismissed by his employer and was entitled to damages for wrongful dismissal.

The case involved David Potter, an employee of the New Brunswick Legal Aid Services Commission.  When his relationship with the Commission started to deteriorate in the first half of a 7-year contract, Mr. Potter engaged in discussions with the Commission regarding a buyout of the remainder of his contract. Mr. Potter then took sick leave before the buyout negotiations were resolved and was advised during his sick leave not to return to work “until further direction”. Mr. Potter’s pay was continued during the suspension, but the Commission delegated Mr. Potter’s powers and duties to another person and, unbeknownst to Mr. Potter at the time, the Commission wrote to the Minister of Justice recommending the revocation of Mr. Potter’s appointment for cause.

Unlike an explicit termination of employment, constructive dismissal exists when the employer engages in an act or conduct that shows an intention to no longer be bound by the original employment contract. The Supreme Court acknowledged that the test for constructive dismissal has two branches.

The first branch consists of two “steps”, and requires a review of the express and implied terms of the contract. The first step requires that the employee establish that the employer’s unilateral change constituted a breach of either the implied or express terms of the employment contract and, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract.  The second step of the first branch examines whether 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 at the time the breach occurred based on the information known to the employee at the time of the breach.

The second branch requires an examination of whether the employer’s conduct demonstrates an intention not to be bound by the contract, giving the employee the right to treat the contract as being at an end.  Under the second branch of the test for constructive dismissal, constructive dismissal can be found even where there is no breach of any term in the employment contract, or where the breach is not substantial; it focuses on the employer’s actions in relation to the contract more generally.  When examining this branch, it is the totality of the employer’s conduct, including conduct engaged in by the employer of which the employee was not aware at the time, that is taken into consideration in determining the employer’s intent.

If either branch is established, the employee has the choice of either accepting the act or conduct engaged in by the employer, or, if the act or conduct affects the employment contract in a “fundamental” way, the employee can treat the employer’s conduct as a repudiation of the contract and sue for wrongful dismissal.

Applying the test above to the facts of the case, a majority of the Court found that there were no express or implied terms of Mr. Potter’s contract that permitted the Commission to suspend him indefinitely without explanation:  the Commission had an obligation to provide Mr. Potter with work. The Court found that the Commission had a duty to be honest, reasonable, candid and forthright in its suspension of Mr. Potter, and concluded that the Commission had not established that the suspension was reasonable in the circumstances; rather, it was reasonable for Mr. Potter to perceive the indefinite, unexplained, unauthorized and unilateral suspension as a substantial change to his contract, and he did not acquiesce to the change. Thus the first branch of the test for constructive dismissal had been proven.

This case is a warning about the use of indefinite suspensions, even if the employee is paid during such a suspension. When contemplating a suspension, employers should be mindful that the overriding question is whether the suspension is reasonable and justified. Employers must demonstrate good faith, including being honest and forthright.  If suspending an employee (even with pay), an employer should advise the employee of both the reasons for and the anticipated duration of the suspension.  Employers should also review their employment contracts to determine whether suspensions are expressly permitted, and if not expressly permitted, give consideration to adding a suspension clause to future employment contracts, or carefully negotiating a suspension clause into existing contracts, to reduce the risk of constructive dismissal.  Alternatively, if an employer has a policy on suspensions, this can assist in arguing that the terms of the contract were not violated.

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

SCC Says Suspension with Pay can Amount to Constructive Dismissal

Enforcing contracts: The importance of careful implementation

In the Ontario Divisional Court decision of Simpson v Global Warranty[1], the issue was the application of a specific termination clause in an employment contract where the employer violated the contract in the course of the termination.

The employer had laid the employee off, and had only paid out his termination entitlements several months later, when the layoff became permanent.  When the employee sued for additional amounts, the employer alleged just cause.

At trial, the Ontario Superior Court of Justice had determined that the employee had been constructively dismissed when he was laid off, and that the employee had not been terminated for just cause.  On appeal, neither of these conclusions was in dispute.  The only issue on appeal was the quantum of severance, and in particular whether the employer could rely on the termination provision in light of its alleged breaches of the contract, such that the employee was entitled to a longer common law reasonable notice period.

The employee argued that a termination provision in an employment agreement should not apply where (1) the employee had been constructively dismissed; or (2) the employer had unsuccessfully alleged just cause for dismissal.  The employee argued that in both cases, the employer had breached the contract, and therefore could not claim the benefit of the termination clause.

The relevant clause of the employee’s contract stated:

[U]nless an employee is terminated for cause, an employee’s employment may be terminated at the sole discretion of the Employer and for any reason whatsoever upon providing the employee with one (1) weeks [sic] notice or pay in lieu thereof, subject to any additional notice, pay in lieu thereof or severance that may be required to meet the minimum requirements of the Employment Standards Act…

As the employer had refused to accept that the employee’s employment had been terminated when he had been laid off and consequently delayed payment, the employee was delayed in (a) receiving severance; and (b) his efforts to secure future employment (because he believed he might be recalled).

The Divisional Court found that the fact that the employer was in breach of the contract by not immediately paying the amount owed was not a breach “of an order of magnitude…as to disentitle the [employer] from the benefit of the termination provision”.[2]

The employee also argued that because the employer labelled the termination as a “lay off”, the employer could not rely on the clause, which only referenced “termination”.  This argument was rejected because the clause addressed the events that transpired:  termination without cause, which included constructive dismissal.

In dealing with the argument that the allegation of cause rendered the employer unable to rely on the termination provision, the Divisional Court distinguished the facts before it from those cases where an employer knowingly wrongfully terminates a contract for cause, which would repudiate the contract.  In Simpson the Divisional Court acknowledged that the termination was initially effected not for cause and the termination amounts were paid out; consequently there was no repudiation.  As such, the failed defence simply resulted in a finding that the employee was terminated without cause, the situation directly addressed in the termination clause.

This case identifies several potential pitfalls when it comes to the application of employment contracts, and in particular highlights the need for employers to carefully and correctly apply termination provisions at the time of termination.  While the employer here was ultimately successful, the case is a useful reminder of just how important it is to cross the “t’s” and dot the “i’s” when proceeding with a termination, to avoid disputes that could lead to costly litigation.

Enforcing contracts: The importance of careful implementation

Sanity Prevails: The Tale of a 90% Reduction to a Punitive Damages Award

In the May 2014 Ontario Court of Appeal decision in the case of Boucher v. Wal-Mart, the $1,150,000 in punitive damages previously awarded to Boucher by a jury was reduced to $110,000. The decision represents a good monetary result for Wal-Mart but it is laced with lessons for employers to keep in mind when faced with allegations of managerial harassment.

The Case:

Boucher was a 10 year Wal-Mart employee at the company’s Windsor store. After a series of promotions and good performance reviews, she was promoted to assistant manager in 2008. The following year, store manager Pinnock began a series of actions intended to harass and belittle Boucher after she refused to falsify a temperature log. Boucher complained to Wal-Mart’s senior management but her complaints were held to be “unfounded” and Boucher was told that she would be held accountable for making them. With her complaints falling on deaf ears and the harassment continuing (often in full view of other assistant managers at the store), Boucher left and claimed constructive dismissal.

The case was tried by a jury and Boucher was awarded damages as follows: (i) $1,200,000 from Wal-Mart, made up of punitive damages of $1,000,000 and aggravated damages of $200,000; and (ii) $250,000 from Pinnock, made up of punitive damages of $150,000 and damages for intentional infliction of mental suffering in the amount of $100,000. As the employer, Wal-Mart was ultimately responsible for the damages award against Pinnock. While there have been a few extremely high punitive damages awards under Canadian law, they are the exception to the rule. Needless to say, Wal-Mart appealed the decision.

The Appeal:

The Court of Appeal conducted an analysis of the different types of damages. Among other things, it confirmed that aggravated damages are intended to be compensatory, whereas punitive damages are intended to punish the wrongdoer. It also confirmed that “if the award of punitive damages when added to compensatory damages, produces a total sum that is so ‘inordinately large’ that it exceeds what is ‘rationally’ required to punish the defendant, it will be reduced or set aside on appeal.” When the damages award against Pinnock was reviewed, the court felt compelled to reduce the $150,000 punitive damages award to $10,000, although the $100,000 award for intentional infliction of mental suffering was left in place.

A similar analysis was used when looking at the damages assessed against Wal-Mart. The $200,000 aggravated damages award was permitted to stand, and the $1,000,000 punitive damages award was then reviewed in conjunction with it. Ultimately, the court decided that “an additional punitive damages award of $1,000,000 [was] not rationally required to punish [Wal-Mart] or to give effect to denunciation and deterrence”, and it reduced the $1,000,000 punitive damages award to $100,000.

Boucher ended up with: (i) 8 months of pay (which was not the subject of litigation); $110,000 from Pinnock for intentional infliction of mental suffering, together with punitive damages; and (ii) $300,000 from Wal-Mart for aggravated damages, together with punitive damages. Ultimately, $1,040,000 in punitive damages was removed from the jury’s findings, thus bringing the decision back into the reasonable range of damages which we have come to expect from Canadian courts. A lesson still remains for employers however, which is that workplace investigations need to be performed thoroughly, objectively and fairly, and a price will be paid when managers are permitted to intimidate and harass the employees that they supervise.

Sanity Prevails: The Tale of a 90% Reduction to a Punitive Damages Award

HR Professionals: The Key to Smooth Corporate Acquisitions

Although human resources professionals are not always recognized for their efforts during a corporate acquisition, the work which they do behind the scenes can often make the difference between an acquisition succeeding or failing.  The following is a brief summary of key issues for HR professionals to stay on top of, long before an acquisition is ever contemplated, during the due diligence phase and right through to closing.

There are two types of transactions which can result in the purchase and sale of a business – a share purchase and an asset purchase.  In a share purchase, the corporate identity of the target company does not change and as a result, the employees remain employed by the same purchaser after closing.  Unless new employment agreements are negotiated with the purchaser, the employment terms and conditions of those employees will not change on closing.  In an asset purchase however, only certain assets of the target company are purchased and the employees are therefore generally terminated by the target company unless they agree to accept new employment with the purchaser.

Keeping Your House in Order:

All too often, proposed acquisitions fall through after the purchaser becomes aware of potential employee liabilities which it will have to assume in the event of an acquisition.  As an HR professional, you can assist with minimizing those liabilities long before an acquisition is being contemplated, by ensuring that: (i) well-drafted employment agreements are properly entered into; (ii) the company is protected with any necessary confidentiality, intellectual property and restrictive covenant agreements; (iii) there are no significant wages, vacation pay and overtime pay accruals; (iv) employee claims and complaints are kept to a minimum; and (v) mandatory statutory obligations are complied with (eg. WSIB registration; compliance with the Occupational Health and Safety Act; compliance with the Pay Equity Act).  When potential employment liabilities are kept to a minimum, it greatly reduces the risk of a purchaser walking away from a deal due to the added costs of correcting the liabilities.

Due Diligence:

HR professionals should be aware of the fact that even in an asset purchase, the Employment Standards Act, 2000 contains successor employer provisions.  In particular, section 9 of the ESA states that if a purchaser hires an employee of a vendor within 13 weeks of closing, the purchaser will be deemed to have taken on the employee with all of his or her prior years of service with the vendor.  Therefore, although the inclination may be to think that the purchaser in an asset deal can “fix” employment problems hand-in-hand with the hiring of employees on closing, sometimes employees will balk at going to a new employer if they are not being hired on similar or better terms to those which governed their employment with the vendor.  In this regard, it is often helpful for the vendor to work with the purchaser during the due diligence phase in order to determine who will be provided with offers of new employment and what the new and continuing terms of employment should be.

HR professionals in Ontario should also be aware of the fact that the Personal Information Protection and Electronic Documents Act (PIPEDA) does not yet have a business transaction exemption.  Although employee personal information is not generally caught under PIPEDA, it can be subject to PIPEDA when employee personal information is being collected, used or disclosed for commercial purposes such as an acquisition.  In order to ensure that there are no personal information breaches in connection with the acquisition of a company, if you work for the vendor it is wise to get the employees to sign a consent to the disclosure of their personal information at the time that they are first hired, as to do so in the midst of a transaction can tip employees off before the transaction becomes publicly known.  Whether or not the employees have signed consents at the time of hire, it is also wise for the vendor and the purchaser to enter into confidentiality agreements with respect to employee personal information which may be disclosed in relation to the transaction.

Closing:

As the closing of the transaction approaches, it is particularly important for HR professionals for both the vendor and the purchaser to try to work together to determine such issues as who will take responsibility for accrued vacation, whether releases will be sought from employees who are part of an asset purchase, whether and what type of new employment agreements will be offered to those employees who are remaining on, and ensuring that employees who are not remaining on are properly terminated at or prior to closing.  As well, there is often a need for certain key employees to remain on for a limited period to assist with transition work, and thought often needs to be given to whether those employees should be provided with a special retention bonus agreement or whether the expectation is that they will simply work out their notice of termination period doing transition work.

As always, it is important for HR professionals to obtain legal advice from an employment law specialist in conjunction with the above steps.  Together, they can make the difference between a difficult acquisition and a successful one.

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HR Professionals: The Key to Smooth Corporate Acquisitions

Ontario Jury Awards Ex-Employee $1.4 Million for Mistreatment by Former Manager

In a cautionary tale for employers, a jury in Windsor, Ontario awarded $1.4 million in damages to a former Wal-Mart employee who alleged that she had been constructively dismissed after being subjected to intentional infliction of mental suffering by her former manager.

The jury award included $1.2 million in punitive damages and damages for mental distress against the employer, and an additional $250,000.00 in punitive damages and damages for mental distress against the manager. The former employee established that the manager had punched her on the arm on two occasions, and had subjected her to profane and insulting mental abuse. Those allegations were that the manager had called the employee “a [expletive] idiot” in front of her co-workers, and that the manager had made the former employee count skids in front of co-workers in order to prove to him that she could accurately count.

A link to the Windsor Star article on the court decision is attached: http://blogs.windsorstar.com/2012/10/10/walmart-must-pay-1-4-million-for-mistreating-employee/

The employer has already appealed the jury’s verdict to the Ontario Court of Appeal, calling the award “…wholly disproportionate and/or shockingly unreasonable.” This is not surprising, given that this award would set a new high-water mark for punitive damages in a wrongful dismissal case. (It appears that the jury may have based its award roughly on the amount that the former employee, who is currently 42 years of age, would have earned had she remained employed in her position until age 65. This figure had been raised by the former employee’s counsel in his closing submissions, although the trial judge had specifically instructed the jury not to consider that figure.)

Although, in our view, it is likely that the jury award will be set aside or reduced on appeal, this decision does underscore how important it is for employers to have a clear policy against incidents of workplace violence and harassment and to take prompt action to address such incidents when potential allegations of this nature come to light.

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Ontario Jury Awards Ex-Employee $1.4 Million for Mistreatment by Former Manager

You Quit: Employee’s Claim of Constructive Dismissal Fails

On August 2, 2012, the British Columbia Supreme Court issued its judgment in the case of Danielisz v. Hercules Forwarding Inc. (2012 BCSC 1155). In Danielisz, the plaintiff was a customs broker with the defendant employer. At the time of her alleged constructive dismissal, the plaintiff was a Director of the employer (as the employer apparently required a licensed customs broker on its Board of Directors) and was manager of the customs department.

The employer’s office staff had a history of dissension and interpersonal difficulties. The Plaintiff claimed that she tried to overcome these difficulties, but that the other staff, including her subordinates, had ganged-up on her. She also claimed that her employer had undermined her authority by favouring lighter discipline for a staff member than the Plaintiff had originally imposed.

After a meeting at which the employer had tried to resolve some of the conflicts in the workplace, the Plaintiff commenced a sick leave which she claimed was caused by workplace stress. The Plaintiff ultimately went on Employment Insurance sickness benefits, attempted to make a claim with respect to the workplace stress to WorkSafeBC, and filed a complaint of constructive dismissal under section 66 of the Employment Standards Act. The workers’ compensation claim was denied, and the Plaintiff withdrew her complaint under the Employment Standards Act at the mediation.

Shortly after the mediation, the Plaintiff relocated to Kelowna, British Columbia, enrolled her son in school, obtained new employment and advised a co-worker by email that she was unwilling to return to the Defendant employer. However, in her communications with the defendant employer, the Plaintiff asserted that she would be willing to return to work with the Defendant at some point after her concerns with the workplace were resolved. In response, the Defendant employer asserted that the Plaintiff, by filing her complaint under the Employment Standards Act, had repudiated her employment agreement.  The employer proceeded to replace the Plaintiff. The Plaintiff then filed her action claiming damages for constructive dismissal.

Discussing the elements of the Plaintiff’s claim, the Court noted that whether or not a constructive dismissal has occurred depends on an objective assessment of all the evidence, rather than the employee’s subjective view of events. Further, the court held that where the allegations of constructive dismissal relate to claims of undermined authority or the behaviour of co-workers, the Plaintiff must show that the conduct in the workplace was such that a reasonable person in the circumstances should not be expected to persevere in the employment. Not every criticism by an employer or dispute among co-workers will sufficiently poison the work environment such that the employment relationship is undermined.

Applying these principles to the case at bar, the Court declined to find that the Plaintiff had been constructively dismissed. The Court found that the Plaintiff had been less than forthright about her own contributions to the negative work environment (finding that the “Plaintiff was engaged in ‘poisoning the work environment’ as much as she was ‘the targeted employee’”), and further, that the employer had not undermined her authority by imposing a lesser discipline on one of her subordinates. The evidence showed that although the Plaintiff’s immediate supervisor was an ineffective manager, he still reinforced her authority after this particular event.

The bottom line, to the Court, was that despite the unpleasant atmosphere, the work was getting done, the Plaintiff was not being forced to bear more than could be reasonably expected, and the Plaintiff had done little to try and improve the situation. Dismissing the Plaintiff’s claim, the Court found that the Plaintiff’s claim to WorkSafeBC and the complaint under the Employment Standards Act, combined with her relocation and new employment and conflicts in her statements to her employer and others, suggested that she had no intention of returning to work, and had rather hoped to extract some form of compensation from her employer. All of this, the Court held, amounted to a repudiation of the terms of her employment.  Her constructive dismissal claim was dismissed.

Danielisz v. Hercules Forwarding Inc., 2012 BCSC 1155 (CanLII)

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You Quit: Employee’s Claim of Constructive Dismissal Fails

Not Required to Mitigate With Demotion Post-Constructive Dismissal

The Ontario Court of Appeal has released its decision in Chandran v. National Bank, 2012 ONCA 205 upholding the trial decision. The trial decision is a cautionary tale for employers.

Mr. Chandran was a 18 year employee of the Bank having worked his way up from account trainee to senior manager. An informal employee satisfaction survey conducted by a HR manager revealed that Mr. Chandran engaged in bullying behaviours. Upon reviewing the results of the survey, Mr. Chandran’s boss concluded he should be removed from supervisory duties. He asked the HR Manager to identify potential openings to which Mr. Chandran could be transferred. On Mr. Chandran’s return from vacation, his boss and the HR manager told him about the general allegations, but refused to provide examples or specifics. Mr. Chandran denied the allegations. The Bank then issued a final warning letter that concluded he had engaged in disrespectful treatment of employees and colleagues contrary to its code of professional conduct and harassment and discrimination policy. The Bank relieved Mr. Chandran from his supervisory role and offered two alternate positions. Both alternate positions were relatively comparable to the senior manager role, without supervisory responsibilities.

At trial, the Bank maintained it did not have to conduct a proper investigation, and that it did not have to have cause for discipline because the two positions were comparable and did not constitute a demotion and constructive dismissal. Mr. Chandran argued both jobs were at a lower grade level resulting in lower compensation and lower prestige and that his trust in the Bank had been destroyed having not been given a chance to defend himself. His career path to future promotions had been jeopardized.

The trial judge found in Mr. Chandran’s favour. The court was critical about the lack of proper investigation conducted to support such serious discipline and harm to a long-term employee’s career. According to the court, a reasonable person in Mr. Chandran’s position would believe his employment future would be significantly limited and terms and conditions of employment substantially changed. This constituted a constructive dismissal. The court further held that, “having been issued the serious discipline … and forced to accept either of the positions which were not equal in terms to the one he held, Mr. Chandran would have been subjected to ‘an atmosphere of embarrassment or humiliation'”.

The Bank also quibbled with Mr. Chandran’s actual mitigation efforts. Although Mr. Chandran secured another management role with another bank within 14 months, the Bank maintained that he should have applied to other lower-rated positions open within the Bank and worked harder to find such a position. The court disagreed. It found that 18 months constituted reasonable notice but reduced this to 14 months in light of when Mr. Chandran secured alternate employment.

On appeal, the Bank did not contest the finding of constructive dismissal, but challenged the trial judge’s conclusion that Mr. Chandran was not required to mitigate his damages by accepting one of the positions offered by the Bank. In a unanimous decision, the Court of Appeal found no palpable and overriding error in the trial judge’s conclusion. It similarly found no fault with the trial judge’s decision to increase Mr. Chandran’s award of costs by $20,000 because the Bank had not accepted a reasonable offer to settle.

What are the key takeaways from this decision? There are (at least) three: (1) a proper investigation with a full opportunity to respond is essential to support disciplinary action, (2) long-term employees deserve additional consideration before disciplinary decisions are made, and (3) demotions are humiliating and embarrassing even if dressed up as a transfer thus removing any obligation to mitigate by acceptance.

Chandran v. National Bank of Canada, 2012 ONCA 205 (CanLII)

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Not Required to Mitigate With Demotion Post-Constructive Dismissal

Boss’s “Stern Talk”, “No Nonsense” Style did Not Cause Constructive Dismissal

An Ontario judge has decided that an employee who resigned due to her boss’s stern talk and businesslike management style was not constructively dismissed.  This will be a welcome decision to employers.

The employee, who worked for a travel agency, went off work on a “stress leave”.  When she returned to work, she presented the owners with 17 “expectations” that she wanted met upon her return to work.  The expectations include having a “comfortable, even temperature in the office”, “even distribution of workload”, “no more derogatory comments or putdowns about my work or my personal appearance”, and “a little more relaxed atmosphere in the office”. She also complained that company uniforms were “funereal”.

Mr. Justice James Wilcox decided that the employee had not been constructively dismissed.  While the employee had complained about being “yelled” at, the plaintiff’s in-court demonstration of her boss’s “yelling” showed that it was “not particularly loud, falling well short of a yell” and was more “tone” than volume and was “more in the nature of stern talk”.

Justice Wilcox stated,

“I accept that the defendant’s is a busy office and there are pressures of deadlines and volumes to contend with.  In addition, [the boss’s] personality and management style might not be to everyone’s liking.  She had expectations of the staff and made them known.  There is definitely an edge to how she comports herself, which she would describe as ‘no nonsense’.  Clearly, it would be uncomfortable to be on the wrong side of her.  On the other hand, her testimony about purchasing clothes or personal services for the staff, for example, reveals another dimension of her, as does a comment recorded by Dr. Beck after the plaintiff had returned from stress leave as follows: ‘Her boss seems to be making some effort to try and accommodate her.'”

Finally, Justice Wilcox noted that the job was inherently stressful, and the plaintiff had other non-work related problems including financial challenges and pre-existing health conditions.  The employee’s personal conclusion that she needed to quit her job was not relevant; objectively speaking, she was not constructively dismissed.

Chartrand v. R.W. Travel Limited, 2011 ONSC 2148 (CanLII)

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Boss’s “Stern Talk”, “No Nonsense” Style did Not Cause Constructive Dismissal