The Terms of Employment Contract: A Case of Constructive Dismissal
December 22, 2017
In one of our previous blog posts, we discussed the Law of Poisoned environments, and what “constructive dismissal” is. It is always useful to find real-life examples of these issues to help clarify a legal concept. This week, we look at a case in which constructive dismissal was alleged, a decision made, and the matter later appealed to the Court of Queen’s Bench in Edmonton. The terms of the employment contract play a significant role in this case.
The employee in question was a lawyer with numerous degrees, including a doctorate in juridical science. He was introduced to EPCOR, the employer, through a head-hunter in 2011. Prior to joining EPCOR, he had several meetings with personnel who worked there and did his own research into the organization. He reviewed the employment contract before signing, which stated that if he left his employment before payment of his bonus, he forfeited that bonus and that his pension had a two-year vesting period (i.e. he had to work for the employer for 2 years before being able to get his pension). The employee was hired in late 2011 and received his bonus in April 2012.
Shortly after the employee started working at EPCOR he began to feel some discomfort with a more senior colleague. He felt he was mistreated by this individual in two meetings. In mid-2012, the employee reached out to another utility company to inquire about potential jobs there. At the same time, he started to hear rumours regarding restructuring. The employee discussed these rumours with a co-worker, who told him he would likely lose his job by the end of November 2012. The employee brought this concern up with his supervisor, who advised it was just rumours and December rolled around and there was no change in his position.
In December 2012, the employee received an offer of employment from the other utility company and accepted it on January 4th, 2013. He was expected to start working there one month later and did not inform EPCOR of the new position.
Around mid-January, the employee inadvertently saw a fax showing a draft of EPCOR’s reorganizational chart and did not see his position on it. When he again raised concerns with his supervisor, the supervisor informed him that nothing was final at that point. At the end of January 2013, he received a company-wide email from EPCOR’s CEO explaining the restructuring, but with no mention of the elimination of jobs. He handed in his notice that day, effective February 4th, 2013, noting his “anticipation” that his position would be eliminated or changed and asking to discuss severance pay, holiday pay, and unpaid wages (including his bonus). He received an email from EPCOR stating that his position had not been declared redundant and there was no change in his employment status. If he failed to return to work, it would be assumed that he had voluntarily resigned. The employee left as of February 4th, 2013.
The Original Trial Judge
Examining the issues, the trial judge found the following:
- The employee’s bonus was not within the definition of unpaid wages in the Employment Standards Code (“Code”). Per the employment contract, the bonus would not be payable unless the employee was employed by EPCOR at the time it became payable (which would have been April 2013, after he had already left the organization);
- If the employee had been constructively dismissed by EPCOR, he would have been entitled to a one-week statutory notice or pay in lieu period under the Code and his bonus would not have been payable in such case either since the notice period would have expired in early February 2013. However, the employee would have been entitled to a four-month common law notice period which would have taken him to May 2013 which would then entitle him to that bonus;
- Per the employment contract, the employer contributions to the employee’s pension would not vest until he had been employed for two years. He had not been employed for 2 years, and would not have been even assuming a four-month notice period. The employee did not provide any authority for his argument that there was some inequity or unjust enrichment in a two-year vesting clause, and the facts did not support his argument that EPCOR should be barred from doing this; and
- He was not constructively dismissed by EPCOR.
The employee appealed the dismissal of his claim for payment of a bonus and return of the unvested employer contributions to his pension as a result of his constructive dismissal by EPCOR, the employer.
He argued, among other things, that the trial judge:
- Erred in law by failing to apply the correct legal test when determining if a bonus constituted wages under the Code;
- Erred in law by failing to apply the correct legal test when determining if EPCOR should be barred from retaining all employer contributions to his pension plan;
- Erred in her application of the second branch of the legal test for anticipatory constructive dismissal set out by the Supreme Court of Canada in Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10 (Potter);
The employee argued that the clause in his contract regarding his bonuses was void under s. 4 of the Code:
Minimum standards cannot be avoided
An agreement that this Act or a provision of it does not apply, or that the remedies
provided by it are not available for an employee, is against public policy and void.
The trial judge had considered s. 4, and had found that the clause did not breach the section because it established what his wages were and were not. In addition, the employee was well aware that the bonus would not be part of his wages if he was not employed by EPCOR at the time the bonus was paid.
The trial judge considered an earlier court decision, where it had been found that a dismissed employee was entitled to a long-term incentive bonus because of the way in which the employer had acted (in bad faith). In this case, the trial judge found that, unlike the employer in that earlier decision, EPCOR had not breached its duty to act in good faith with the employee.
The court decision the trial judge relied on was overturned. However, there was still no reviewable error in the trial judge’s interpretation of the law.
The employee argued that because he and EPCOR spent some time negotiating pension before he signed the employment contract, there was a shared assumption that he would receive a pension. The trial judge held that the facts do not support an estoppel (or a bar) as EPCOR did not make any representation that the employee would get his pension in any other way other than what was outlined in his employment contract. The appeal judge found that the trial judge made no error in this finding of fact.
Anticipatory Constructive Dismissal
Potter confirmed that the employee bears the burden of establishing constructive dismissal. It then sets out two branch test for this burden to be met:
- This branch is two steps:
- There must be a unilateral change by the employer which is found to breach a term of the employment contract;
- The term must be material.
- Constructive dismissal consists of conduct that, when viewed in light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract.
The employee argued that the decision to restructure the company had been a unilateral change. The trial judge did not agree. She found it confusing that he would believe a co-worker who has nothing to do with these types of decisions. As for the second branch of the test, she found that a reasonable person may have been concerned out the changes, however, they may have made inquiries rather than risk serving notice and later rely on having been constructively dismissed. The appellate court found that the trial judge properly analyzed the facts and justified her conclusions in light of the tests.
The employee failed on the other two grounds and his appeal was dismissed.
The Take Away
When alleging constructive dismissal, you will need to prove that there was a unilateral change by the employer which breached a term of the employment contract, that the term is material to the contract, and that a reasonable person would conclude, based on the circumstances, that the employer no longer intended to be bound by the terms of the contract. Employment law is full of legal tests like this one, and the burden is often on the employee to prove that their case satisfies these tests. If you think you have been constructively dismissed, it is important to have an experienced employment lawyer. At HMC Lawyers LLP, we regularly assist employees with workplace matters, including questions about constructive dismissal. To book a consultation, call 1-800-480-3534 or contact us online. We represent clients in Calgary, throughout Alberta, and across Western Canada.