Month: March 2025

In Mata, 2024 CIRB 1141, the employee complained that she had been constructively dismissed by her employer after she was placed on a leave without pay for failing to adhere to the employer’s vaccination policies. While Vice-Chairperson Love ultimately determined the employee had not been constructively dismissed, he walked through the principles of constructive dismissal for federal employees covered by the Canada Labour Code. 

Legal Basis for Constructive Dismissal Under the Canada Labour Code

Firstly, Vice-Chair Love indicated that, although the Code does not explicitly use the term “constructive dismissal”, this form of dismissals is ultimately incorporated into the Code. Citing the Federal Court of Appeal’s decision in Srougi v. Lufthansa German Airlines, Vice-Chair Love indicated that dismissal under the Code is “the implementation by the employer of his intention to unilaterally terminate the contract of employment binding him to his employee”. In other words, the concept of an unjust dismissal under the Code includes the idea of a constructive dismissal. Having determined that the Code’s unjust dismissal provisions also apply for constructive dismissals, Vice-Chair Love moved on to outline the legal test to determine whether a constructive dismissal has occurred.

Tests for Constructive Dismissal

As Vice-Chair Love indicated, there are two potential methods whereby a constructive dismissal may occur. The first is when the employer makes a single unilateral change that constitutes a substantial breach of the employment contract. The second is when the employer engages in a series of acts that demonstrates it no longer intends to be bound by the contract of employment. In either circumstance, the employer will have repudiated the employment contract through its conduct, hence the employee will have been constructively dismissed. 

Beyond the two potential avenues for constructive dismissal, Vice-Chair Love also cited the Supreme Court’s decision in Potter regarding the two-stage analytical process used for constructive dismissal. Vice-Chair Love indicates that the two-stage process applies for instances of a single unilateral breach. The first stage requires the decision maker to determine whether the employer breached the contract, considering whether the employer had the authority to make the changes to the contract, and whether the employee essentially condoned the change. The second stage considers whether a reasonable person in the same situation as the employee would have felt that the essential terms of the contract had been changed. In circumstances where the constructive dismissal arises from a series of acts, the question revolves around whether the cumulative effect of the acts shows the employer no longer intends to be bound by the employment contract.

Application to the Facts of the Case

After laying out the fundamental principles underlying constructive dismissal in a federal context, Vice-Chair Love examined how the law might apply to the facts of the case. In particular, the complainant was concerned that she had been constructively dismissed when she was put on a leave without pay in response to her vaccination status. While unpaid suspensions can in some contexts demonstrate a constructive dismissal, it is important in the first place to determine whether unpaid suspensions were contemplated in the contract of employment. In other words, if an employment contract provides for unpaid suspensions, it may limit the ability to pursue a constructive dismissal case. In this case, while unpaid leaves were not originally part of the employment contract, they did become part of the employment contract through the employer’s ability to make reasonable rules affecting the workplace. 

As Vice-Chair Love indicates, an employer has the right to make reasonable rules for the management of its workplace, but there are some constraints to these rules in the context of unjust dismissals. Rules that are introduced to the workplace follow the KVP test. In particular, unilaterally introduced rules in the workplace:

1. Must not be unreasonable;
2. Must be clear and unequivocal;
3. Must be brought to the attention of the affected employee before the employer can act on it;
4. The employee must be notified that the breach of such a rule could result in discharge, if it is used as a foundation for discharge; and 
5. The rule should be consistently enforced from the time the employer introduced it.

It is precisely these features that Vice-Chair Love considered regarding the new leave without pay policy. In short, Vice-Chair Love noted that the employer made a reasonable rule for the health and safety of its employees in requiring vaccination status to be reported. Furthermore, he noted that the rule was clear and unequivocal and had been brought to the complainant’s attention. On top of that, the employee was notified that breach of the rule could result in discharge, and that the rule had been consistently enforced as others were also placed on leaves without pay. Ultimately, however, Vice-Chair Love noted that the employee was never dismissed, as she was later permitted to, and actually did, return to work after updating her vaccination status. Nevertheless, this case provides helpful insights to constructive dismissal issues in federal workplaces.

A recent case in Alberta has helpfully reviewed the laws of contractual interpretation in an employment law context. In Plotnikoff v. Associated Engineering Alberta Ltd., 2024 ABKB 706, the judge engaged in a thorough review of case law regarding contractual interpretation.

Standard of Review for Contractual Interpretation

First and foremost, the judge noted the particular standard of review for contracts on appeals. In particular, contractual interpretation entails issues of mixed fact and law, hence it is reviewable on the standard of palpable and overriding error. Absent such an error, a reviewing court is not entitled to review the lower court’s interpretation of a contract.

Key Principles of Employment Contract Interpretation

Moving forward, the judge reflected on the sets of principles that apply specifically to the interpretation of employment contracts.

Inequality of Bargaining Power in Employment Contracts

First and foremost, the judge noted that courts have recognized the inequality of bargaining power inherent in the employment relationship and the limited opportunity of employees to negotiate contractual terms. Consequently, certain principles for contractual interpretation have developed in the employment contract context. 

Doctrine of Contra Proferentem in Employment Law

One particular aspect of contractual interpretation in the employment law context is the doctrine of contra proferentem, which interprets ambiguities in the employment contract in favour of the employee. Citing case law, the judge notes that “in employment law, uncertainty ought to be resolved in favour of the employee”, and that given “a termination clause that could reasonably be interpreted in more than one way, courts should prefer the interpretation that gives the greater benefit to the employee”. In other words, the contract is interpreted against the employer who drafted the contract, because the employer is presumed to be in a position of sufficient sophistication to draft the contract to say precisely what they want to say. 

Presumption of Reasonable Notice in Employment Contracts

In addition to this principle, the judge also added that employment contracts are presumed to contain an implied term requiring employers to provide employees with reasonable notice of dismissal. Of course, such an implied term can be modified or replaced with explicit limitations to entitlement to reasonable notice. However, there are various requirements around any attempt to limit notice entitlements. 

Requirements for Limiting Notice Entitlements

One such requirement is that any attempt to limit entitlements in breach of employment standards legislation is a breach of the law and is hence unenforceable. Another requirement, which the judge noted is that “an enforceable employment contract must contain clear and unequivocal language to extinguish or limit an employee’s common law rights”. Failure to meet this requirement permits the employee to pursue common law reasonable notice. In relation to the above principle that ambiguities are resolved in favour of the employee, the judge noted that, in fact, there is a presumption that the employee is actually entitled to common law reasonable notice, and only if the contract unambiguously removes or limits that right will that presumption be defeated. 

The judge’s thorough-going analysis of the general principles of contractual interpretation pertaining to employment contracts provides a very helpful summary to workers hoping to understand their entitlements and what to look for in their own employment contracts.

How Contractual Interpretation Applied in the Case

The judge went on to apply these principles of contractual interpretation to the particular termination clause in this case. The termination clause stated:

“Termination without Cause: The Company may terminate employment without cause upon providing the Employee with notice as may be mandated by the Employment Standards legislation or such additional notice as the Company, in its sole discretion, may provide or, at our option, pay in lieu of such notice”.

The judge in this case upheld the trial judge’s interpretation of the termination clause as not limiting Mr. Plotnikoff’s entitlement to reasonable notice. In reaching this conclusion, the judge cited both the Supreme Court of Canada’s decision in Machtinger, but also numerous Ontario cases to outline how the clause did not actually limit entitlements. Particularly, the judge ruled that the clause only indicates that the worker would receive employment standards notice. But notice under employment standards legislation is only a minimum standard. 

No maximum standard is outlined in employment standards legislation, nor does the employment standards legislation remove the presumption of common law reasonable notice. In other words, the judge found that the clause did not unambiguously remove or limit Mr. Plotnikoff’s entitlement to reasonable notice. 

Additionally, the judge noted that the employer even contemplated providing more than the minimum standards through the language of “additional notice as the company, in its sole discretion, may provide”. The judge found that such a contemplation also indicated that there was no unambiguous limit of notice to that outline in the employment standards legislation.

The case of Maximenko v. Zim, 2024 ONSC 5540, helpfully illustrates some of the nitty-gritty details of a wrongful dismissal case. In particular, it provides some helpful guidance on issues of mitigation and elements of compensation. Workers who have been terminated should be aware of what elements of their compensation they may be entitled to during a period of reasonable notice. Likewise, issues of mitigation can be tricky and can often make or break a wrongful dismissal case, hence it is helpful to have a sense of what the courts have found to be adequate mitigation efforts.

Mitigation

Workers who have been wrongfully dismissed have a duty to mitigate their damages. In other words, workers must take reasonable steps to minimize their losses resulting from their termination by looking for new employment. If a worker fails to take these reasonable steps, compensation awarded for reasonable notice may be reduced in proportion to the worker’s failure to mitigate. The judge outlined the test for proving that a worker has failed to mitigate their damages. Specifically, the onus is on the employer to prove that “(1) the employee failed to take reasonable steps to mitigate damages, and (2) if reasonable steps had been taken, the employee would have been expected to secure a comparable position reasonably adapted to their abilities”. The judge went on to add that workers’ mitigation efforts are not held up to a standard of perfection. 

In the circumstances of this case, Ms. Maximenko applied for over 70 jobs between the day she was dismissed and the day her case was heard by the court (i.e., 18 months). Despite this, the employer argued that her efforts to find new employment were inadequate. In particular, the employer had sent Ms. Maximenko numerous job links after having dismissed her. However, Ms. Maximenko provided notes of these potential jobs noting that some were no longer available, some required qualifications she did not have. The court took note of Ms. Maximenko’s engagement with the employer-provided job links, holding that she had actually followed up on each posting, even if she ultimately determined the jobs were not the right fit for her. 

Additionally, the court took relevant notice of Ms. Maximenko having family care obligations for her ill mother, who later passed on. The judge acknowledged that Ms. Maximenko’s job search efforts decreased during that timeframe to assist with her mother’s illness and passing. Ultimately, the court determined that, while Ms. Maximenko’s mitigation efforts may not have been perfect, they were reasonable. The court pointed towards the 70 applications she did pursue, as well as the difficulty for older employees, as she was in her 60’s by the time of the hearing, in finding new employment. Beyond that, the court took note that the employer did not demonstrate that Ms. Maximenko could have been successful if she took reasonable steps.

Elements of Compensation

Ultimately, the judge determined the reasonable notice period was 24 months. Then, the judge moved to focus on the constituent elements of Ms. Maximenko’s compensation. Helpfully, both the employer and Ms. Maximenko agreed on these elements, entailing annual salary, bonuses, car allowance, health insurance, and defined pension benefit plan. All of these elements formed part of Ms. Maximenko’s total compensation and should be covered under the reasonable notice period. While someone’s annual salary is generally not challenged for compensation, other elements of compensation like bonuses can occasionally result in further dispute during a wrongful dismissal case. 

Despite the employer claiming that the annual bonuses were discretionary, the judge determined that Ms. Maximenko was entitled to her bonus throughout the notice period. However, due to evidence advanced at trial, there was a discount applied to the bonus. In particular, the employer paid out no bonuses in 2023, hence Ms. Maximenko could not receive a bonus that year. However, this was the only year with evidence showing a bonus was not paid out. In sum, the court applied a 3-year average to determine the amount of Ms. Maximenko’s bonus, with a particularized discount to reflect the missing 2023 bonus payout. 

When ascertaining the value of the pension benefits, the court noted that, absent evidence on the present and commuted values of the pension, the value of the pension contribution is assumed to be a reasonable measure of the damages. To determine the reasonable measure of damages in this case, the court doubled the pension adjustment amount from Ms. Maximenko’s 2020-2022 T4 returns to reflect the 24-month notice period.

Federal Court of Appeal Orders Redetermination

The Federal Court of Appeal recently ruled that an adjudicator’s decision in an unjust dismissal case was unreasonable. In doing so, the court ordered the case to be redetermined by another adjudicator. 

Background: Maternity Leave and Job Elimination

The facts of the case are rather particular. The complainant took a maternity leave, during which time her business analyst position was backfilled. Upon returning from her maternity leave, the complainant worked alongside her fellow business analyst who previously backfilled her position. The employer then engaged in corporate downsizing, and determined it only needed one business analyst, choosing to lay off the complainant.

Adjudicator’s Decision: Employer Acted in Good Faith

The adjudicator determined the employer engaged in a good faith restructuring. Further, the adjudicator found that the employer decided to retain the complainant’s fellow employee because the fellow employee had more seniority, and the employer believed they also had more experience in the position. The adjudicator determined that the complainant was reinstated after her leave, and that her maternity leave was not a factor in the decision to terminate her.

Complainant’s Argument: Discriminatory Impact of Selection Criteria

However, the court noted that the adjudicator failed to consider another argument that the complainant made. Namely, the argument that the employer’s decision was ultimately discriminatory because the selection criteria adversely affected the complainant due to her maternity leave, hence the dismissal was unjust. The complainant argued that discounting time she spent on maternity leave was discriminatory. Furthermore, she argued that there cannot be proper lay off for shortage of work or discontinuance of function if that lay off violates the maternity leave protections of the Canada Labour Code, which requires an employee’s employment and seniority be deemed continuous through maternity leave.

Judicial Review and the Federal Court’s Overreach

After the adjudicator decided that the complainant was not unjustly dismissed, she pursued a judicial review at the Federal Court. The Federal Court ultimately upheld the adjudicator’s award but did so by making a decision on the arguments which the adjudicator ultimately did not. The Federal Court of Appeal rightly noted that a reviewing court is limited in its functions on judicial review in an unjust dismissal case. In citing the Supreme Court’s decision in Vavilov, the Federal Court of Appeal noted that “a reviewing court should not step in and decide issues of significance that are relevant to the outcome that were argued before the administrative decision maker that the decision maker neglected to consider”. Unfortunately, that is precisely what the Federal Court did in its decision. Instead, the Federal Court should have focused on the reasons given by the adjudicator and determined whether the adjudicator properly considered the arguments before them. In this case, the Federal Court of Appeal noted that, had the Federal Court done so, “it would have been apparent that the adjudicator’s decision was unreasonable for its failure to address important arguments advanced by the appellant”.

Federal Court of Appeal’s Decision: Unreasonable Ruling Warrants Redetermination

The Federal Court of Appeal noted that the complainant’s arguments regarding discrimination and violation of the maternity leave provisions in the Code were substantive and formed an important part of her case. While the Court did acknowledge that adjudicators do not need to respond to every possible line of analysis, failure to consider key issues or central arguments raised by the parties can undermine the reasonableness of an adjudicator’s decision. The Court also acknowledged that case law supported the argument that decisions are discriminatory if one of the factors it relied on was discriminatory. Further, the Court indicated that the employer’s approach to the Code violates the statutory protections of the minimum standards legislation. Nevertheless, the Court did not determine these issues, indicating that to do so would place it in the same error that the Federal Court made. Instead, the Court ordered that the complaint be considered by a different adjudicator for the alternative arguments she raised which had not been considered by the adjudicator. 

The Court of Appeal has recently issued a decision reaffirming its previous decision in Wacksdale v. Swegon North America Inc., 2020 ONCA 391. In that case, the Court of Appeal made a landmark decision that “for-cause” termination provisions that violate the Employment Standards Act are illegal, and that breach of the Employment Standards Act in one termination provision means all other termination provisions are likewise invalid.

Why the “For Cause” Termination Provision Was Deemed an Unenforceable Termination Clause

In the present case, the Court of Appeal was asked to review the lower court’s decision on the validity of both the “without cause” and for cause” termination provisions. At the outset, the Court of Appeal indicated that the “for cause” termination provision is illegal. This provision stated that the employer could terminate the employee’s employment without notice or pay for “cause”, while defining “cause” in a very broad manner beyond the exceptions in the Employment Standards Act. Consequently, the clause was found illegal. As the Court explained, because the Employment Standards Act is remedial legislation, courts should favour interpretations of the act which encourage employers to comply with the act. Failure to do so may result in making the act ineffectual. As the Court noted, “if the only consequence for an employer of drafting a termination clause that does not comply with ESA minimums is an order that they comply, employers will have little incentive to draft a lawful termination clause”. Another element that the Court indicated regarding unenforceable termination clauses is that compliance with the ESA at termination does not fix a termination clause that was unenforceable from the beginning of the employment relationship. 

The Court reminded that failure to comply with the high standard of misconduct outlined in the ESA in drafting a termination clause can lead to such a clause being unenforceable. In this case, that is precisely what occurred. The “for cause” termination provision purported to terminate the employee for cause without payment as long as the employee engaged in a much lower standard of misconduct than that outlined in the ESA. Consequently, the clause was found to be unenforceable. Beyond the mere fact that the cause stipulated was of a lower standard, the clause itself was also an “inclusive” clause. The clause also used the phrase that cause “shall include but is not limited to the following”, a phrase which the Court held permitted the employer to expand and deem as “cause” things that were not listed in the contract, making the definition of “cause” even more expansive beyond the narrow and high standard as outlined in the ESA.

Impact of an Unenforceable Termination Clause on Employment Contracts

Beyond the cause provision, the Court was also asked to review the lower court’s decision on the without cause provision. The Court of Appeal refused to make a ruling on this provision, determining that because the “for cause” provision violates the Employment Standards Act, the entire set of termination provisions are entirely invalid. The Court of Appeal determined that it would be best to leave the question of the without cause provision for a case whereby determination of that question would directly affect the outcome of the case.