Constructive dismissal is a specific type of wrongful dismissal. Constructive Dismissal occurs when you are forced to leave your job against your will because of your employer’s conduct. Imagine a scenario where an employer makes life so absolutely unbearable for an employee that there seems to be no option but to stop working. That’s basically constructive dismissal in a nutshell.
In the case of Potter v. New Brunswick (Legal Aid Services Commission), 2015 SCC 10, the Supreme Court of Canada provided a summary of the law of constructive dismissal. The Supreme Court of Canada held that constructive dismissal arises when an employer’s conduct shows an intention to no longer be bound by the employment contract, and the employee treats that conduct as a refusal of the contract by the employer.
An employee can prove constructive dismissal by showing that in light of all the circumstances, a reasonable person in the employee’s shoes would also conclude that the employer no longer intended to be bound by the employment contract. An employee must then show that his or her failure to go back to work was CAUSED by the employer’s conduct. But if an employee consents to the change in the essential terms of the contract, then it will not amount to constructive dismissal.
In a recent Ontario Court of Appeal decision on constructive dismissal, McGuinty v. 1845035 Ontario Inc. o/a McGuinty Funeral Home 2020 ONCA 816, the Defendant Employer was found to have breached a 10-year work contract, one year into the contract. As a result, the Plaintiff Employee was awarded over $1.2 million in damages reflecting 9 years of annual salary, vehicle expenses, benefits and commissions.
In the McGuinty case, the Plaintiff had sold his funeral home business to the Defendant Employer but was kept on as the General Manager under a ten-year transitional contract. The contract included a non-competition clause preventing the Plaintiff from working elsewhere in the same industry, but did not include any provision for early termination.
The relationship between the Plaintiff and Employer began to break down as a result of the lack of trust between the Employer’s key people and the Plaintiff. The Employer’s conduct included:
- The Employer arranged for another employee to track the amount of time that the Plaintiff spent in the office and to inform the Plaintiff he was not longer allowed to use the company vehicle for personal use, despite the vehicle being part of the Employee’s compensation under the 10-year transitional contract.
- The Plaintiff was required to keep time sheets.
- The Employer changed the locks on the funeral home without notice to the the Plaintiff after the Plaintiff removed furniture that he had been storing there.
- The Employer moved the Plaintiff’s desk to the kitchen in the basement of the funeral home as well as removing the Plaintiff’s portrait that had been hanging near the front desk, along with removing photos of the Plaintiff’s grandfather, father, and brother.
The Plaintiff ended up taking medical leave and not returning to work due to anxiety and depression caused by the conduct of his Employer. The trial judge found that the Plaintiff was constructively dismissed.
The Court of Appeal upheld the trial judge’s decision. There was no error in finding that the Plaintiff did not condone the Employer’s conduct and the calculation of damages was reasonable.
The breakdown in the employment relationship in this case ended up being a costly breach of contract for the Employer, with damages calculated in excess of $1 million.