The challenges and complexity of constructive dismissal law

By Paul Russell, LegalMatters Staff • A recent Ontario Superior Court decision provides helpful guidance to what is a constructive dismissal though it arguably strays from common-law principles in assessing whether the employee’s duty to mitigate was met, says Toronto employment and labour lawyer Stephen J. Moreau. 

“The law of constructive dismissal is easy to state but hard to apply and understand in real-life situations, which is why the recent decision is of particular interest,” says Moreau, a partner with Cavalluzzo LLP.

“The basic legal principle is that a constructive dismissal occurs when an employer ‘substantially’ alters the employment contract. In practice, knowing when a ‘substantial’ change has taken place or not is tricky,” he says.

“And, while courts state that, in the face of a constructive dismissal, the employee has the right to quit and sue for damages, courts add that quitting employees have obligations. They must take steps to mitigate their loss by looking for other work, including potential new roles with the employer who just constructively dismissed them,” Moreau explains.

It is this complex framework that forms the backdrop for the recent decision of Quesnelle v. Camus Hydronics Ltd. In Quesnelle, Moreau represented the plaintiff in a summary judgment motion seeking damages for constructive dismissal.

Truck part of man’s compensation package

According to the judgment, Michael Quesnelle was a certified heating, ventilation and air conditioning (HVAC) specialist who was hired by Camus in 2014. His compensation package included a company-supplied Dodge Ram truck and payment of all its operating costs for seven years since he was commuting from his home in Oshawa to work in Mississauga.

“The vehicle benefit made up an important percentage of his total compensation: taking it away would mean that Mr. Quesnelle would face a real cut in take-home pay,” Moreau says.

In 2021, with more than 400,000 kilometres on the vehicle, Quesnelle told his supervisor the truck needed to be replaced. Following an exchange of several emails, he was told the company would not replace it. “Bottom line, I am being told to take a large pay cut and I cannot afford to do this,” Quesnelle wrote back before resigning, according to court documents.

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In the court’s decision concluding that Quesnelle had been constructively dismissed, Justice Charney cited several precedents including a 2015 Supreme Court of Canada judgment. One precedent provides that, “When an employer’s conduct evinces an intention no longer to be bound by the employment contract, the employee has the choice of either accepting that conduct or changes made by the employer, or treating the conduct or changes as a repudiation of the contract by the employer and suing for wrongful dismissal …. if the employee is successful, he or she is then entitled to damages in lieu of reasonable notice of termination.”

‘They took away something of real value’

“Clearly it was a constructive dismissal because they took away something of real value they had agreed to give him and continued to give him,” says Moreau. “By taking away the truck, it was like they said, ‘We’re going to pay you 30 per cent less tomorrow.’ No employer can impose something like that.”

While Moreau tells LegalMattersCanada.ca that he is pleased the court sided with his client regarding the constructive dismissal, he regards the court’s treatment of the mitigation question that followed deserves a second look.

According to the judgment, shortly after Quesnelle left, Camus offered to re-employ him and provide the salary and benefits he had before, including a vehicle and reimbursement costs associated with it for one year. The firm also offered to pay for the salary lost from the date of his resignation and to make a contribution of $2,500 for his legal expenses.

Moreau says his client rejected that offer because he had already sold his house in Oshawa and moved to Omemee, Ont., for financial reasons, where he owned a home where his partner lived. Since the Mississauga office is approximately 150 kms away from Omemee, a trip to the office would add an additional 40 minutes each way to his already lengthy commute.

Re-employment offer ‘a complete capitulation’

“Camus’ offer of re-employment was effectively a complete capitulation on their part, and Mr. Quesnelle could have simply returned to work,” Justice Charney stated in his judgment. “However, I am also of the view that a reasonable person could consider the commute to be too long and too far. An additional 40 minutes per commute (80 minutes per day) when the commute is already around one hour each way, is one that a reasonable person could decline.”

While Moreau says he agrees with this conclusion, “where the judgment proves more interesting is in the court’s next finding that, because Omemee was further away than the GTA than Oshawa, Mr. Quesnelle’s damages needed to be reduced a little on the theory that he had taken himself to an area with fewer jobs in his field.”

“If he intended to look for work in the HVAC field, a reasonable person would not move away from the GTA,” Justice Charney wrote. “In my view, Mr. Quesnelle’s decision to move from Oshawa to Omemee reduced his ability to mitigate his damages. This was a personal decision, but the employment consequences of that decision should not be visited upon Camus … this is not a complete failure to mitigate, but I find that, given these factors, the notice period for which the Plaintiff is entitled to damages should be reduced by 30 percent, to a total of seven months.”

“This decision seems to be saying that if you live in an area with supposedly plenty of jobs and you move to a place with fewer jobs, that may work against you,” says Moreau. “I think that this is interesting. Sure, everyone has a duty to mitigate, but under common law people are entitled to move when it suits their personal circumstances.

‘Ruling may not be in keeping with legal precedent’

“In this case, he couldn’t afford two homes, so he made the decision to move to Omemee,” he adds. “People have a right to look after themselves and decide where to live based on their circumstances. This ruling may not be in keeping with legal precedent.”

Moreau adds that, shortly after this decision was released, the Ontario Court of Appeal weighed in on the mitigation issue in Lake v. La Presse. It ruled that for an employer to win a mitigation argument, the evidence cannot just be that the employee’s choices led them to have access to fewer jobs generally. 

Moreau queries whether the Quesnelle conclusion on mitigation would be revisited in light of Lake. “The record indicates, in Quesnelle’s case, that there may have been fewer jobs east of Oshawa than in the GTA. But is that enough to prove a failure to mitigate?,” he says.

“All told, Quesnelle is an interesting reminder of the complexities associated with constructive dismissal law,” he says.

More from Cavalluzzo LLP

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