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Employee’s unsuccessful action for constructive dismissal constitutes a resignation

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The New Brunswick Court of Appeal recently upheld a trial decision that by commencing an action for constructive dismissal, an employee had elected to terminate his employment relationship. In Potter v New Brunswick (Legal Aid Services Commission), 2013 NBCA 27, the appellant, Potter, appealed his dismissal of an action for constructive dismissal. The Court of Appeal found no reversible error and dismissed the appeal.

Potter was appointed Executive Director of Legal Aid in early 2006. By 2009, the relations between Potter and his employer had soured and the parties agreed to discuss a severance package. However, in the fall of 2009, before finishing those discussions, Potter went on sick leave. Shortly before Potter was to return to work, the employer placed him on an administrative suspension of an unspecified duration with full pay and benefits in the hopes that his absence from the workplace would create a climate conducive to negotiation. Potter then brought an action for wrongful and constructive dismissal, claiming the employer had engaged in a series of unlawful acts, including his suspension, which repudiated the terms and conditions of his employment.

In its defence, the employer alleged that Potter had not been constructively dismissed and that his commencement of the action meant he had resigned from his employment. The trial judge agreed with the employer on both issues, and this decision was upheld by the Court of Appeal.

In considering the claim of constructive dismissal, the Court of Appeal reiterated that the test is whether a reasonable observer would have concluded they were dismissed, given the indefinite duration of suspension with full pay. The Court emphasized that an indefinite suspension without pay does not automatically constitute a constructive dismissal. Rather, it must constitute a substantial or fundamental change to an employee’s employment contract. The Court also noted that the burden of proving that the changes have been made to the employment contract was with the employee (paragraph 92). The Court found that the trial judge did not make a palpable or overriding error in concluding that there was no constructive dismissal, because the indefinite suspension had not repudiated the employment contract.

The Court of Appeal also agreed that Potter’s decision to commence the action against his employer constituted an election to terminate his employment. The Court stated:

In litigation, as in life, consequences, at times dire, flow from choices made, whether voluntary or otherwise. While, on occasion, the interests of justice allow for, and indeed compel remedial relief, that option is without principled basis in the case at hand. The appellant, a senior lawyer under administrative suspension with full pay, chose to sue for damages for constructive dismissal. He knew or ought to have known that, if he failed to establish this allegation at trial, his lawsuit would constitute an election to terminate his employment relationship with the Commission and, correlatively, a resignation from both his employment and appointment as Executive Director.

Thus, the Court found that Potter elected to repudiate his employment contract and resign from his position when he willingly commenced the action against his employer.

This case affirms the principle that, in certain circumstances, an employee’s commencement of an action for constructive dismissal will constitute an election to terminate her or his employment. However, employers should be cautious in dismissing an employee who brings an action against them, as several cases have held that not all lawsuits brought by an employee against their employer constitute a repudiation of the employment relationship. The determination is fact-specific and employers should seek legal advice before summarily terminating the employment of an employee who brings an action against them.

Alison Bird and Tara-Lynn Wilcox
Cox & Palmer

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Alison J. Bird

Employment Lawyer at Cox & Palmer
Alison Bird is a lawyer practicing in Halifax with the Atlantic regional law firm, Cox & Palmer. Alison is growing her practice in the areas of labour & employment law and litigation. Alison is a frequent presenter on employment law topics and recently presented on the challenges being faced by employers dealing with changing demographics in the workplace. Read more
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