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2018-02-17T16:31:10-04:00 February 20, 2018|Constructive Dismissal, Employment Contracts, Employment Law|

Constructive Dismissal Based on Poisoned Workplace

Constructive dismissal cases are tough for employees in most cases.   A finding of constructive dismissal is often not the end of the inquiry. Where the employee quits in the face of a constructive dismissal, the court must go on to determine if the employee was justified in leaving his or her employment.   Leaving and claiming damages flowing from the constructive dismissal is only justified in limited circumstances.

The leading constructive dismissal case in Canada is Potter v. New Brunswick Legal Aid Services Commission, [2015] 1 SCR 500, 2015 SCC 10 (CanLII) which set out the two (2) branches of constructive dismissal which were recently summarized by the Ontario Court of Appeal in Chapman v. GPM Investment Management, 2017 ONCA 227 (CanLII) as follows:

The first branch is apt where an employer has, by a single unilateral act, breached an essential term of the contract of employment. The second branch allows for constructive dismissal to be made out where there has been “a series of acts that, taken together, show that the employer no longer intended to be bound by the contract”.

The second branch arises, for example, in cases where, by its conduct or by allowing conduct to persist unaddressed, the workplace has become poisoned or the employee has been harassed.

This issue was considered by the Ontario Superior Court of Justice in Lancia v. Park Dentistry, 2018 ONSC 751 (CanLII). In this case, the employee quit and alleged that she had been constructively dismissed because of “repeated improper deductions of vacation pay as well as allegations of sexual harassment.” The focus, in other words, was on the second branch of the Potter test which the Court summarized as follows:

The second branch allows for constructive dismissal to be made out, when viewed in light of all the circumstances, would lead a reasonable person to believe that the employer no longer intended to be bound by the contract

In terms of the vacation issue, when the employer purchased the dentistry practice, it learned that the prior owner had been paying its employees their vacation pay before the pay was earned.  It was calculated based on the assumption that an employee would work 40 hours a week throughout the year which could “result in employees receiving a vacation pay windfall, because it was calculated on the erroneous assumption of hours worked rather than on actual hours worked.” Such was the case with Ms. Lancia.

Park implemented a new employment agreement (in return for a $2000 signing bonus) that changed the way vacation pay was paid and calculated. According to the court:

In terminating her Old Contract, Park Dentistry provided Lancia with eighteen months working notice, in light of her age, position and years of service.  The Cover Letter informed her in writing that, in the event that she chose not to sign the New Contract by the signing deadline of January 14, 2016, her Old Contract would end on February 14, 2016.

Signing the New Contract meant the immediate termination of the old contract.

Ms. Lancia signed the new contract without objection.

On February 9, 2016, Ms. Lancia handed in her resignation and raised the vacation change, not having received a raise, and that Dr. Park “is done with his staff, especially me.”

The court found that the new contract was enforceable. Ms. Lancia had been given $2000 as consideration for the contract. In any event she was given 18 months advance notice of the change in vacation policy at which time she could either continue under the new terms or be terminated.   See, for example, Wronko v. Western Inventory Services Ltd., 2008 ONCA 327 (CanLII). She chose to sign the new contract and continued to report for work.   The court observed:

In asserting a claim for wrongful dismissal, the jurisprudence provides that an employee may decide to act on a breach of the employment contract committed by the employer and end their employment. Or an employee may opt to continue with the employment. If an employee decides to treat the breach as a constructive dismissal, he or she must communicate that decision to the employer in a reasonable time: Farquhar v. Butler Brothers Supplies Ltd. (1988), 1988 CanLII 185 (BC CA), 1988 CanLII 185 (B.C.C.A.), 23 B.C.L.R. (2d) 89, at paras. 92 and 93.

Ms. Lancia did not complain promptly and the delay, the court noted, was “illuminating”. In fact, Ms. Lancia only raised the issue of constructive dismissal 13 months after she resigned.

As noted “an employer has the right to impose fundamental changes to an employment contract, and if so, is required to give reasonable notice of the change to the employee. Park Dentistry did exactly that and they met this requirement by providing 18 months’ working notice.”

In terms of the claim of sexual harassment and poisoned work environment, the court noted:

Workplaces become poisoned for the purposes of constructive dismissal only where serious wrongful behaviour is demonstrated. The employee bears the onus of establishing a claim of a poisoned workplace. The employee’s genuinely held beliefs are insufficient to discharge this onus. There must be evidence that an objective, reasonable person would support the conclusion of a poisoned workplace environment. Except for particularly egregious stand-alone incidents, a poisoned workplace is not created as a matter of law unless serious wrongful behaviour sufficient to create a hostile or intolerable environment is persistent or repeated.

A leading case is Janzen v. Platy Enterprises Ltd., [1989] 1 S.C.R 1252, 1989 CanLII 97 (SCC).

The Court did not find the plaintiff in Lanzia to be a credible witness and the evidence did not support the conclusion of sexual harassment or a poisoned work environment. As the court noted:

To the objective, reasonable bystander, the evidence presented does not support a conclusion that a poisoned workplace environment had been created, persisted or repeated.

In all of the circumstances, the court determined that most of the claims (except for the claim for reimbursement of vacation monies recovered or withheld by Park Dentistry in 2015 that were due and owing to the plaintiff) be dismissed.

The case is yet another example of the risks associated with constructive dismissal cases on employees. It is also a situation that discusses Branch #2 of the Potter case.