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We had previously written about a case in which an employee who was constructively dismissed under a fixed-term agreement was awarded over a million dollars in damages.

Recently, the Ontario Court of Appeal upheld that decision.

Employee Claims Constructive Dismissal

The employee owned of a funeral home when, in 2012, he agreed to sell his shares to the employer corporation, a company controlled by two brothers. 

Under the share purchase agreement, the employee entered into a transitional consulting services agreement (the “agreement”) by which he would continue in the employ of the funeral home for a fixed-term of ten years. 

The agreement provided that the employee would work as general manager of the funeral home and be paid $100,000 per year, as well as sales commissions.

However, disagreements between the brothers and the employee ensued and, within 11 months, the employee went on medical leave and never returned to work. 

The employee claimed he had been constructively dismissed and sought damages for breach of the agreement, intentional infliction of mental suffering and discrimination prohibited by the Ontario Human Rights Code

Lower Court Finds in Favour of Employee

After reviewing the behaviour of both parties, the court concluded that neither the brothers nor the employee were blameless for the falling out that occurred. 

However, the court found that over the course of several months before the employee’s leave, one of the brothers:

  • Improperly terminated the employee’s use of the company vehicle; 
  • Without notice to the employee, recruited an employee who was subordinate to him to track his time at the funeral home; 
  • Did not pay the employee commissions to which he was rightfully entitled; 
  • Removed the employee’s photograph from the funeral home; and 
  • Without notice to the employee and without seeking any explanation from him, changed the locks to the funeral home. 

The trial judge concluded that the brothers had therefore engaged in a course of conduct that would lead a reasonable person in the employee’s position to conclude that they no longer considered themselves bound by the terms of the agreement, and that the employee accepted this repudiation and was constructively dismissed. 

In total, the employee was awarded $1,274,173 in damages, a figure that reflected the nine-year term remaining on the employee’s fixed term contract, along with commissions, benefits, and expenses.

The brothers appealed the decision, arguing that the employee had condoned their conduct and, as a result, he was not entitled to claim constructive dismissal. They claimed that the employee did not treat their actions, either individually or collectively, as a repudiation of the employment agreement. In addition, the brothers argued that the trial judge erred in calculating the damages.

Court of Appeal Dismisses Appeal

The Court of Appeal began by explaining that constructive dismissal can be established by either: 

  • the employer’s breach of an essential term of the employment contract; or 
  • a course of conduct by the employer that establishes that it no longer intends to be bound by the employment contract.

However, where an employee condones such conduct, the employee cannot claim to have been constructively dismissed. The court explained that a claim that the employee has condoned a breach or course of conduct is a defence to a claim of constructive dismissal and the burden is on the employer to establish it. The court then stated:

“In the usual case, a finding of condonation occurs where an employee has continued to work or resumed work despite the employer’s actions. But continuing or resuming work is not determinative of condonation; employees must have a reasonable period of time to attempt to resolve workplace problems short of litigation […]. Care must be taken before concluding that an employee has given up his or her right to sue for constructive dismissal, and employees’ unique personal circumstances must be taken into account.”

The court stated that in this case, the main problems was the fact that there appeared to have been a delay because the employee did not purport to accept the brothers repudiation of the contract until two years later, when he issued his statement of claim. However, the court stated:

“By any standard, the period of time taken by the [employee] to make his election was lengthy. But while it may be reasonable to find that an employer’s burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer’s impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal.”

The court then examined the circumstances surrounding the employee’s delay in making his election. Ultimately, the court upheld the trial judge’s findings that the employee did not return to work, could not return to work, and did not condone the brothers actions. 

As a result, the court upheld the finding of constructive dismissal. It further dismissed the brothers’ arguments relating to damages.

The appeal was dismissed.

Get Help

If you have been terminated, you may be tempted to simply sign the severance package you have been provided with so that you can sever ties with your former employer and begin to move forward. While this may seem enticing, it is not the best course of action. Most employees do not realize how much they are entitled to upon termination and, without obtaining knowledgeable advice, often end up accepting significantly less than they should receive.

If you have been fired, one of the first phone calls you should make is to a wrongful dismissal lawyer. The highly experienced Mississauga employment lawyers at Bader Law have been advising employees on termination, severance packages, and wrongful dismissal for several years. 

We can review any termination letter or package you have been provided with, negotiate with your employer on your behalf, and file a wrongful dismissal claim where necessary. With our lawyers on your side, you can ensure you are getting the maximum amount that you are entitled to.

Contact a knowledgeable employment lawyer as soon as possible. At Bader Lawour lawyers will counsel you on your rights, advise you on your options, help you create a plan for moving forward, and secure fair compensation for the wrongful termination of your employment. Contact us online or at (289) 652-9092 to learn how we can help.