The End of Constructive Dismissal?

Loehle v. Purolator Courier Ltd. – Ontario Superior Court of Justice – June 12, 2008

An employee cannot resign due to a fundamental change to their employment contract, but rather must seek new employment while still employed to fulfill their duty to mitigate.

The Ontario Superior Court of Justice’s recent decision on June 12, 2008 in Loehle v. Purolator Courier Ltd., [2008] O.J. No. 2462 (“Loehle”) seems to have altered the concept of constructive dismissal. The decision requires employees when faced with fundamental unilateral changes to their employment contract to not resign, but rather fulfill their now altered employment duties while seeking out new employment. If the employee does not continue working, then they will be found to have not fulfilled their duty to mitigate and may be barred from receiving any award of damages for constructive dismissal.

In Loehle, the employee started to work for the employer in the position of national claims manager.  The office that he worked in was being relocated out of province, and the employer offered the employee either a six month severance package or a four month management development position. The employee chose the latter, and on completion of the four months, the employee was transferred to a warehouse facility as a Unit Manager.

The employer posted an internal job posting for the position of internal audit manager for the period of three years. The employee applied for the position and received it, with the employer stating, “We would like to take this opportunity to offer our congratulations on your promotion to manager, Internal Audit, Operations.” At the end of the three year period, the employee was not re-assigned as contemplated in the original job posting, but rather was told by the employer to find his own position within the company.

Eventually, a human resources representative for the employer met with the employee and offered him the position of Unit Manager at another location in the province. The employee stated that he was not prepared to accept a demotion to his former position. The offer was made to the employee again, with the promise he would have the same salary as an internal audit manager, yet the employee declined. The employer then informed the employee that if he did not attend work on the next business day in the position of Unit Manager, the employer would view his conduct as a resignation. The employee did not report back to work and commenced a claim of constructive dismissal.

The Trial Judge found that the employee had been constructively dismissed, stating that the employer “made unilateral and significant changes to the terms of [the employee’s] employment contract. The contract did not include a term requiring a return to a lower position. Despite continuing the same salary level, a concession for management’s negligence, the demotion to Unit Manager involved dramatic changes in responsibility, status and working conditions.” Despite this finding, the Trial Judge had to determine whether the employee fulfilled his duty to mitigate. Applying the principle of law established by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31, the Trial Judge found that the employee had failed to mitigate and did not award any damages to the employee. The Trial Judge stated, “I am not satisfied that the working environment would have been one of –hostility, embarrassment or humiliation’. The working relationships were not –acrimonious’ and the work would not have been –demeaning’… [The employee’s] claim is based upon his demotion and the result constructive dismissal. His subjective assessment of the situation is not unreasonable. An objective consideration results in a different conclusion. In my view, a reasonable person would have accepted the position offered, notwithstanding the demotion, until alternate employment elsewhere was obtained. Searching for a comparable position with another company while working should be less difficult than during a period of unemployment.”

This decision appears to have changed the concept of constructive dismissal in employment law. Employees are no longer permitted by the Courts to simply resign from their position when constructively dismissed and fulfill their duty to mitigate by seeking comparable employment. Instead, employees must now objectively consider whether or not there is any “hostility, embarrassment or humiliation” and whether it is possible to continue working despite the change while seeking new employment elsewhere to mitigate their damages as a result of the change being unilaterally made by their employer. If there is, then the employee would be permitted to resign from their position and claim constructive dismissal. If there are no such barriers involved in continuing to work despite the unilateral change, then the employee must continue working in order to mitigate while looking for new employment elsewhere.

Comments are closed.