A Novel Twist on Constructive Dismissal

Mark Geiger

A recent decision of the Ontario Superior Court has added a new arrow to the quiver of an employee whose terms and conditions of employment have been unilaterally amended.

The Facts

In Russo v. Kerr Bros. a long term employee of a candy factory had his annual remuneration reduced from about $114,000 to $60,000 per year.  Mr. Russo had been employed at the same place since he was 16 years old. He was 53 at the time this case was heard and had been the warehouse manager since 1977.  The initial wage reduction had been 10% across the board for all employees, and later significantly more for Mr. Russo.

Russo did not accept the new terms of his employment and engaged a lawyer who wrote to the Company unambiguously informing the Company that his client did not accept the new conditions.  Notwithstanding this, Russo continued to work for the Company at the reduced salary until his lawyer brought a motion under the new rules for summary judgment.  The motion was heard and decided about 18 months after the unilateral change and while Russo continued to be the warehouse manager.

Under the new summary judgment rule, a court has the power to award ‘partial summary judgment’.  Counsel for the Company argued this was not a proper case for summary judgment, in part because the period of notice determined as appropriate by the court – 22 months – had not expired and it was therefore not possible to determine the final damages.  He also argued that this was not a proper case for summary judgment at all because the court should hear all the evidence before determining the appropriate period of notice.

The Decision

Mr. Justice Gray did not agree.  He found that the new test for summary judgment – “no genuine issue requiring a trial’ – was met in this case.  He awarded a notice period of 22 months. The Plaintiff had argued entitlement to 28 months, whereas the Company had proposed 18.

There are two interesting principals to be taken from this case.

First, it is appropriate for an employee to remain employed after being constructively dismissed, and so long as he or she informs the employer that the new terms are not acceptable, continuing to work under the new conditions will not be taken as acceptance of them.

The court found Russo was entitled to the difference between what he would have made under the original terms, and what he actually made during the period of notice.  His income during this period was treated as mitigation very similar to the analysis in Mifsud v MacMillan Bathurst Inc, a Court of Appeal  decision from 1989.  In that case, unlike the Russo case, Mifsud had been explicitly offered continued employment in mitigation of his damages, which he had rejected.  Here no such offer was made. Russo merely continued to work and the Company allowed him to do so.  The letter from his lawyer was all Russo needed to establish the fact he was not accepting the new terms during the period of reasonable notice.

Second, and perhaps more interestingly, the court made use of the specific provisions of the summary judgment rule to grant relief for the period which had expired at the time the motion was heard (18 months), but retained jurisdiction to deal with the remaining period of notice once the 22 months had expired. Under Rule 20.01, the court is empowered to grant summary judgment on ‘all or part of the claim’.  Here the court awarded damages for part of the claim and adjourned the matter for enough time to allow the remaining period of notice to run. The court indicated it would deal with the damages for the balance of the notice period at that time if the parties were unable to agree as to the appropriate damages in the case.

This case may demonstrate an increased appetite on the part of Ontario’s courts to deal more expeditiously with wrongful dismissal actions.  This case demonstrates the importance of appropriate legal advice at the front end of a case.  Such advice can preserve and enhance rights – in this case the rights of a terminated or constructively dismissed employee.

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