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Constructive dismissal case proves that prestige and job satisfaction matter

Kelly Doctor

November 19, 2013

Court holds constructively dismissed employee did not have to continue to work for the company in order to mitigate his losses

A 26-year non-unionized employee scored a major victory in the recent constructive dismissal case of Morgan v. Vitran Express Canada Inc.

Earlier this month, an Ontario judge awarded $80,000 to employee Dunstan Morgan, holding he had been constructively dismissed after his employer transferred him out of a supervisory job that was central to operations and into a clerical job of less importance and prestige.

The judge found that the change in position was “demeaning and humiliating” and therefore constituted a change in the essential terms of the employment contract, even though the salary was the same for both positions.

Further, the judge determined that Morgan, who was represented by GP’s Christine Davies, did not have to continue to work for the company in order to mitigate his losses, as he had been subject demeaning and demoralizing conduct leading up to the employer’s decision to transfer him into the clerical job.

The employer had tried to justify the change in positions by building a case to demonstrate that Morgan was not capable of performing his job. It compiled a list of errors made by Morgan years after they had allegedly occurred  and used this to place Morgan under a corrective action plan. However, it provided no meaningful feedback to Morgan, and when the corrective action plan inevitably failed, the employer then required Morgan to take a skills and aptitude testing to determine whether he was capable of performing a job that he had in fact been doing for more than 20 years.  In addition, the employer accused Morgan of lying about an injury for which he made a WSIB claim.

Two interesting points emerge from the decision.

First, the decision recognizes that the employment contract is about more than just the amount of money a person makes. Too often in constructive dismissal cases, the focus is on whether there was a loss of salary, benefits, incentives or other forms of monetary compensation. What is clear from this decision is that less tangible factors, such as the importance of the position within the company, the ability to make decisions, and the authority to supervise and lead others are also integral to a job.

Not only do these factors contribute to the prestige of the position and the status of the employee within the company, but they also contribute to the employee’s sense of self-worth and career satisfaction.

This is not to say that any time an employee is unhappy with a change in their job duties, they will be able to make a claim of constructive dismissal. Rather, when considering whether a constructive dismissal has occurred, a court must look to the totality of factors, including whether the change will be perceived by the employee and others as a ‘demotion’ in standing within the company, even if there is no loss in pay.

The second point of interest is that the judge found that Morgan did not have to mitigate his losses by accepting the new position offered by the employer for the duration of the notice period.  In Evans v. Teamsters Local Union No. 31, the Supreme Court of Canada ruled that when employee is wrongfully or constructively dismissed, she may be required to accept an offer from her old employer to return to work as long as it would not result in the employee returning to an atmosphere of hostility, embarrassment or humiliation. If the employee declines the offer, she may be found to have failed to mitigate her losses, meaning that her damages will be completely or significantly reduced.

There was some concern, particularly after the Court of Appeal’s decision in Chevalier v. Active Tire & Auto Centre, that employers could take advantage of this case law to reduce their liability by offering an alternative position to an employee in the hope the employee would refuse.

In Chevalier, an employee sued after he was laid off, but just days after the lawsuit was launched, the employer claimed the layoff was a mistake and offered Chevalier his job back. The Court of Appeal found that in refusing this job offer, Chevalier failed to mitigate his losses. Despite the fact that Chevalier had been under scrutiny for his performance for some time, the Court held that the workplace was not, objectively speaking, an atmosphere of hostility, embarrassment or humiliation.

In contrast to Chevalier, the judge in this case found that it would not have been reasonable for Morgan to accept the employer’s offer of alternative work. The judge found that it would have been demeaning for Morgan to accept the change in position as the other employees would have been aware that the company had offered him the job because it thought he was not able of performing his previous work. The judge also considered the employer’s conduct leading up to the termination and determined that “it seems that Morgan was being set up to fail” and that “he was treated without respect”.

Employees who are thinking about claiming constructive dismissal still have difficult choices to make. It will always be risky to turn down an offer of alternate employment. However, this case demonstrates that where an employee truly has been treated badly, they do not have to accept a demeaning or substandard job to mitigate their losses.


Kelly Doctor

Practice Areas

Employment Law