Canadian Employment Law Today

Canadian HR Reporter, 2021 fuel allowance. The TCSA did not contain a provision addressing early termination, but it had a non-competition clause that barred the employee from working in the funeral home business for 10 years. Conflict between the parties developed almost immediately after the employee be - gan his employment as general manager. The company's co-owner required the employee to complete time sheets and asked the employee's subordinate to track the employee's time in the office. The co-owner also advised the employee that he could not use the company vehicle for personal use, and the company failed to pay commissions. After the employee entered the funeral home on a weekend to remove some furniture, the co-owner alleged that the em - ployee threw out files without authorization and the company changed the locks without notifying the employee. The employee then went on medical leave and sent a note stating: "I wish to make clear I am on medical leave and am not stepping down from my posi - tion as general manager at McGuinty Funeral Home." When the employee attended a funeral at the home while on medical leave, he noticed his desk had been moved to the basement and his photograph had been removed. Two weeks later, he sent an email to the co-owner indicat - ing he wanted to clear up a few matters, includ- ing his outstanding commissions, "so we can move forward." The employee never returned to work. Two years later, he commenced an ac- tion alleging constructive dismissal. The trial decision The leading case on constructive dismissal is the Supreme Court of Canada's decision in Potter v. New Brunswick (Legal Aid Services Commission), which held that constructive dismissal can be established by the employer's breach of an essential term of the employment contract or a course of conduct by the employ- er that establishes that it no longer intends to be bound by the employment contract. The tri- al judge applied the second branch of the Pot- ter test, concluding that: the company engaged in a course of conduct that would cause a rea- sonable person to conclude that it no longer considered itself bound by the TCSA; and the employee both accepted this repudiation and was constructively dismissed. The trial judge rejected the company's argument that the em - ployee's extended sick leave amounted to his condonation of the company's conduct, em- phasizing that condonation requires accep- tance of the new situation that is inferred from a willingness to remain in the altered position. The trial judge noted that the employee did not remain in the position; in fact, he could not return to work due to depression and anxiety caused by the company's conduct. The trial judge awarded the employee $1.27 million in damages for the amounts he would have earned for the balance of the term of the TCSA. The company's appeal The company appealed the decision of the trial judge, arguing once again that the employee condoned its conduct and was not entitled to claim constructive dismissal. The Ontario Court of Appeal (OCA) noted that condonation must occur "within a reason - able time," as it had established in Persaud v. Telus Corporation, and stated that this is a fact- specific determination made by the trial judge, whose finding is entitled to deference. "Care must be taken before concluding that an employee has given up his or her right to sue for constructive dismissal, and employees' unique personal circumstances must be taken into account," said the OCA, pointing to an employee's mental or physical health as an example. "Given the wide variety of personal circumstances, it is not surprising to find cases in which employees have been found not to have condoned breaches or repudiation of their contracts of employment despite having continued to work even for relatively extended periods of time." The OCA stated that the employee's note clarifying that he was on medical leave and not stepping down from his position, together with the subsequent email indicating his de - sire to resolve his concerns, did not support a conclusion that the employee condoned the company's conduct. The OCA recognized that the issue in this case was delay: The employee did not purport to accept the repudiation of the contract un - til two years after he took medical leave when he issued his statement of claim. While the OCA acknowledged that the time taken by the employee to make his election was lengthy, it noted the difficulty in concluding that con - donation has occurred, "where the employee has been unable to work because of the very conduct that establishes the constructive dis- missal." In the OCA's view, the employee's delay must be understood in the context of his in- ability to return to work due to depression and anxiety caused by the company, as well as in the context of the "particular circumstances of his employment" — including his age, his guarantee of employment until his retirement under the TCSA, his family's name on the fu - neral home and the non-competition clause in the TCSA that barred him until retirement age from working in his community in the only profession he knew. Taking all of these cir - cumstances into consideration, the OCA did not interfere with the trial judge's finding that the employee "did not return to work, could not return to work, and did not condone the [company's] actions." Constructive dismissal had occurred. Bottom line for employers McGuinty puts employers on notice that, in considering whether an employee has con- doned a constructive dismissal, a court will analyze all contextual factors and consider the unique personal circumstances of the employ- ee, including whether their health — physical or mental — prevented them from returning to work. If, for example, an employee is on medi- cal leave because they became depressed and anxious due to the employer's conduct in con- structively dismissing them, this will not nec- essarily create an inference that the employee condoned the changes to the terms of their employment. Even employees who continue to work "for relatively extended periods of time" after being constructively dismissed may not be found to have condoned their construc - tive dismissal if their personal circumstances allow such a conclusion to be drawn. Accord- ingly, employers should avoid conduct that may result in a claim of constructive dismissal because, as was the case in McGuinty, such con- duct may result in a significant damage award to the employee. McGuinty also emphasizes the financial risk facing employers that enter into fixed-term contracts that do not contain well-drafted ter- mination clauses that meet minimum employ- ment standards. For more information, see: • McGuinty v. 1845035 Ontario Inc. (McGuinty Funeral Home), 2020 ONCA 816 (Ont. C.A.). • McGuinty v. 1845035 Ontario Inc. (McGuinty Funeral Home), 2019 ONSC 4108 (Ont. S.C.J.). • Potter v. New Brunswick (Legal Aid Services Commission), 2015 SCC 10 (S.C.C.). • Persaud v. Telus Corporation, 2017 ONCA 479 (Ont. C.A.). Rhonda B. Levy is a knowledge management counsel for Littler LLP in Toronto, monitoring legislative, regulatory and case law develop- ments. She can be reached at (647) 256-4545 or rlevy@littler.com. Barry Kuretzky is a partner with Littler LLP in Toronto, practising workplace law and labour relations. He can be reached at (647) 256-4503 or bkuretzky@littler.com. George Vassos is a partner with Littler LLP in Toronto, practising on a wide variety of labour and employment law issues. He can be reached at (647) 256-4504 or gvassos@littler.com. 6 | | April 7, 2021 April 7, 2021 « from ONTARIO COURT on page 1 Employee went on medical leave but didn't step down Cases and Trends Cases and Trends

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