Restructuring tools to minimize the risk of successful constructive dismissal claims

3 minute read
15 August 2019


One of the biggest concerns for employers reorganizing in response to operational requirements is the potential for constructive dismissal claims by employees impacted by the changes.

A recent Ontario Superior Court of Justice decision reminds us that a finding of constructive dismissal by a court, does not always result in an award of damages.

In Gent v. Strone Inc., 2019 ONSC 155 ("Gent"), Justice Pollak was required to assess whether the former employee ought to have mitigated his damage claim by accepting the employer's offer of recall following a 26 day temporary layoff.

The Court concluded that the layoff was a constructive dismissal, given the absence of any contractual entitlement on the part of the employer to impose the layoff without consent.

However, that finding did not end the debate. The Supreme Court of Canada decision in Evans v. Teamsters, Local 31 2008 SCC 20, is the leading decision on the issue of whether an employee must accept re-employment with their former employer as part of the duty to mitigate.

In Evans, the issue was framed as "whether a reasonable person would accept such an opportunity … The critical element is that an employee not be obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation … ".

In Gent, the Court sided with the employer, despite the fact that the employee had already commenced litigation, relying upon the following facts:

  1. the employee was being recalled to the same position on the same terms and conditions;
  2. the recall letter advised that if the employee could not return to work on the date specified, he could contact the employer to discuss an alternate date;
  3. the recall letter confirmed that the employer maintained no hard feeling or ill will towards the employee and still considered him a valued employee;
  4. the recall letter confirmed that the employee would suffer no reprisals;
  5. the recall letter confirmed the employer's understanding that the return to work was not an admission that future layoffs were permissible or that the employee agreed with the employer's position regarding the pending litigation; and
  6. the recall letter confirmed that if the employee had questions, he was free to contact the employer to discuss.

The relevant factors articulated in Gent, may provide useful guidance to employers engaged in any restructuring where significant changes to important aspects of the employment relationship are contemplated.

Carefully documented communications to the affected employees should demonstrate that the changes are in response to legitimate organizational imperatives, rather than a disguised form of discipline. The individuals subject to the changes should be made to understand that they are considered valued employees and that the employer intends to maintain and honour the terms of the contractual relationship.

While the unilateral imposition of such changes may leave open the question of employee satisfaction and engagement, properly managed the risk of successful constructive dismissal claims can be significantly reduced.

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