Constructive Dismissal: More Mental Gymnastics from Ontario’s Court of Appeal

Farwell v. Citair

In Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177 (CanLII) the Ontario Court of Appeal (OCA) appears to have further complicated the law of constructive dismissal to help a sympathetic plaintiff.

The Facts

Mr. Farwell was 58 years old when his employer demoted him from Operations Manager/Vice President of Operations to Purchasing Manager after 38 years service. He took the position he was constructively dismissed, quit and was unemployed for several months.

The Law

The employer took the position that Mr. Farwell had a duty to mitigate his damages by accepting the demotion. In 1989 the OCA stated that an employee must accept a demotion “[w]here the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious” [Misfid v. MacMillan Bathurst Inc. 1989 CanLII 260 (ONCA)].

Many of the subsequent cases addressing this issue focused on the question of whether or not the personal relationships involved are acrimonious. In the Farwell case, no such animosity existed. In addition, the court did not disagree with the employer’s position that salary and working conditions would have been almost the same as his previous position, the only difference being a likely reduction in bonus.

The Decision

So why did the OCA conclude that Mr. Farwell was not required to accept the demotion? Because the employer did not offer Mr. Farwell the demotion AGAIN after he initially refused to accept the demotion and took the position he was constructively dismissed.

Wronko v. Western Inventory Service Ltd.

This case is reminiscent of Wronko v. Western Inventory Service Ltd., 2008 ONCA 327 (CanLII), http://canlii.ca/t/1wqsn which is another constructive dismissal case decided by the OCA.

The Facts

In Wronko, the employer provided Mr. Wronko with 24 months notice that it would reduce his termination pay entitlement from 24 months to 30 weeks. At the time, it was generally accepted that an employer could provide reasonable notice of a change in a fundamental term of employment. Mr. Wronko objected to the proposed change but kept working. Two years later the employer asked the employee to sign an employment contract with a 30 week termination clause and told him if he refused to sign it “then we do not have a job for you”. The employee was not prepared to sign the contract, thought he was fired, and sued for wrongful dismissal.

The Decision

The OCA awarded Mr. Wronko 24 months’ pay less the income he earned during the two year period after his termination.

In coming to its conclusion, the OCA stated the employer could have avoided this result if it had informed Mr. Wronko “that his refusal to accept the new contract would result in his termination and that re-employment would be offered on the new terms.” As in the Farwell case, the OCA helped an employee by imposing a new obligation on an employer.

Why Employers Are Frustrated

The employer in Wronko – like the employer in Farwell – could not comply with a new common law legal obligation that was imposed by the OCA because it was unaware of this obligation at the time of the constructive dismissal.

Decisions like Farwell and Wronko infuriate employers and management side employment lawyers. Luckily for me, I also represent employees. Having said that, advising employers or employees in constructive dismissal situations continues to be extremely difficult because of decisions like Farwell and Wronko.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers and employees on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]