Constructive dismissal Canada
The Supreme Court of Canada’s March 6, 2015 decision in Potter v New Brunswick Legal Aid Services Commission modifies the test for constructive dismissal. This case concerned whether, and in what circumstances, a non-unionized employee who is suspended with pay may claim to have been constructively dismissed.
While upholding the traditional test of constructive dismissal—whether a unilateral and fundamental change to the terms and conditions of employment has been made—the Supreme Court of Canada articulated a new, second test which also determines whether a constructive dismissal has occurred. Under the new test, courts will ask whether the employer’s actions and treatment of the employee leading up to the alleged constructive dismissal demonstrate that the employer did not intend to continue to be bound by the employment contract. If a reasonable person in the same circumstances as the employee would conclude the employer no longer intended to be bound by the employment agreement given the employer’s actions, then a constructive dismissal will be found.
In Potter, the Plaintiff, David Potter, was Executive Director of the New Brunswick Legal Aid Services Commission (the “Commission”) for a seven-year term. During the first half of that term, the relationship between the parties deteriorated, and the parties began to negotiate a buyout of the Plaintiff’s employment contract. Before the matter was resolved, the Plaintiff went off work on sick leave. While on sick leave, the Commission suspended the Plaintiff indefinitely with pay and delegated his powers and duties to another person. Just prior to the Plaintiff’s return to work, and unbeknownst to him, the Commission wrote a letter to the Minister of Justice recommending that the Plaintiff’s employment be terminated for cause.
Consequentially, the Plaintiff claimed that he was constructively dismissed and commenced litigation. The Commission then terminated his pay and benefits, claiming that the commencement of litigation was equivalent to a resignation.
The trial judge and the New Brunswick Court of Appeal agreed with the Commission, finding that the Plaintiff had not been constructively dismissed, and that by commencing litigation he had repudiated his contract and voluntarily resigned.
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