March 6, 2015
Today, the Supreme Court of Canada revisited the law on constructive dismissal in Potter v. New Brunswick Legal Aid Services Commission, a decision which may have significant consequences for employers.
The case concerned Mr. Potter, the Executive Director of the New Brunswick Legal Aid Services Commission (“Commission”). Three years into his term, while Mr. Potter was on sick leave, the Commission suspended him indefinitely with pay and, unbeknownst to him, recommended his dismissal in a letter to the New Brunswick government.
Mr. Potter, a non-unionized employee, alleged that he was constructively dismissed and commenced a lawsuit against the Commission. The trial judge and the New Brunswick Court of Appeal dismissed his claim, finding that he had not been constructively dismissed and that by launching the lawsuit, Mr. Potter had repudiated his contract and voluntarily resigned.
The Supreme Court reversed the lower courts’ decisions and found that Mr. Potter was constructively dismissed. In doing so, the Supreme Court re-affirmed the long-standing two-part test to determine whether an employee has been constructively dismissed: the court must first identify an express or implied contract term that has been unilaterally breached by the employer and, second, determine whether that breach was sufficiently serious to constitute constructive dismissal by altering a fundamental term of the employment contract.
In Mr. Potter’s case, there was no basis upon which to suspend him for administrative reasons. The Supreme Court found that the employer had no express or implied power to suspend Mr. Potter from attending work and performing his duties. The suspension therefore constituted a constructive dismissal of Mr. Potter.
The Supreme Court then went further, finding that an employer’s conduct will also constitute constructive dismissal if it more generally shows that the employer intended not to be bound by the employment contract. This approach is retrospective and requires consideration of the cumulative effect of past acts by the employer.
The Supreme Court continued with this analysis, concluding that an employee is not required to point to an actual specific substantial change in compensation, duties or other terms of employment. Rather, it is now sufficient to show that the “course of conduct” pursued by the employer demonstrates an intention to no longer be bound by the employment contract. Importantly, this test is measured, not by the intention of the employer, but whether a reasonable person “in the same circumstances as the employee” would conclude the employer intended to no longer be bound by the employment agreement.
Arguably, this reasoning opens a large door for employees who, in the absence of a specific change to the terms of their employment, wish to argue they have been constructively dismissed based on historical actions of the employer which, objectively, may be taken to demonstrate an “intention” not to be bound by the terms of an employment agreement.
If you have any questions about this topic or any other questions relating to workplace law, please do not hesitate to contact a Mathews Dinsdale lawyer.
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