The Blurred Line Between Constructive Dismissal and Resignation

Written on behalf of Arbesman Hamilton LLP

Under most circumstances, employees who quit their jobs are not entitled to damages. However, the law isn’t always cut and dry, and issues such as constructive dismissal can blur the line between being terminated and quitting. The Ontario Court of Appeal recently addressed these nuances in Persaud v. Telus Corporation.

The Circumstances Around the Resignation

The employee in question had worked for the employer for seven years, until April 2003, when she resigned two days after her colleague did the same. The colleague was her friend, and had been her supervisor and mentor for much of her career. The colleague had hired the employee and brought her to the product development department where they both worked until their resignations. The colleague’s resignation was triggered by a disagreement he had with his own supervisor.

A Claim of Constructive Dismissal

After she resigned, the employee claimed she had been constructively dismissed. She argued that there had been a significant change in her working conditions, namely an increase in the hours she was expected to work. In addition, she submitted there was a poisoned work environment in the workplace. Both of these reasons allegedly drove her to resign.

The employee sought damages for both bad faith termination and intentional infliction of mental suffering. In addition, she sought aggravated and punitive damages related to an investigation that had been carried out after her resignation in which the employer determined she had accessed and sabotaged one of the employer’s computer servers following her resignation.

Decision at Trial Level

The trial judge acknowledged that both a poisoned worked environment and a significant change in working conditions could both establish constructive dismissal in the right circumstances. However, in this case, neither of those reasons were the cause of the employee’s resignation.

Instead, the trial judge found that the employee had accepted longer working hours following promotions over four years and had done so without complaint. Therefore, she had not resigned due to changes in her working conditions.

Instead of accepting the employee’s claim of constructive dismissal, the trial judge found that the employee had quit:

…because she was dissatisfied with the management of Telus, unhappy with the direction the company was taking, critical of the performance evaluation structure, and particularly unhappy with Telus’ treatment of (her colleague), her friend and mentor. She did not resign because of increased hours or a poisoned work atmosphere.

The trial judge emphasized that:

an employee cannot claim damages for constructive dismissal when there is no causal link to the reason for the resignation, even if there has been a unilateral change to an essential claim of the contract.

The employee appealed the decision.

On Appeal

On appeal, the employee claimed the trial judge had wrongfully concluded that the “reasons for the ‘resignation’ must be related to the dismissal.” The Court of Appeal rejected this argument, stating the requirement for a link between a breach of contract and the damages suffered by a plaintiff is an essential element of a breach of contract claim.

In employment law, the breach of contract is the dismissal of employment (either wrongful dismissal or constructive dismissal). Damages for the dismissal represent loss of income during the notice period. Wrongful or constructive dismissal is not an action based on the sole fact of the dismissal itself, but rather, that the dismissal occurred without adequate notice, or payment in lieu of that notice. Therefore, an employee cannot claim damages for constructive dismissal if there is no causal link to the reason for termination, even if there had been a unilateral change to an essential term of the contract.

The key takeaway from the Court of Appeal’s decision is the reaffirmation that an employee cannot claim constructive dismissal if the reasons that would normally qualify as such were not behind their decision to resign.

Arbesman Hamilton LLP represents both employees and employers in workplace disputes and employment law matters. We can help in problems that may arise during the course of the employment relationship, or in preparing for and dealing with discipline and/or termination. Phone us at 416-481-5604 or contact us online to schedule a consultation today.