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How a bad hire could lead to damages for constructive dismissal

constructive dismissal

In the wake of the #metoo movement, we saw many individuals lose their jobs and careers due to allegations of sexual harassment. One question that has arisen, and which our firm has commented upon (see Don’t Call It A Comeback: What happens when the #metoo accused resurface or Hollywood in the Aftermath of the #MeToo Movement), is how employers are to react when those individuals attempt to return to the workforce. In other words, what does one do when they receive a job application from someone that lost a previous job as a result of sexual harassment?

In the recent case of Colistro v Tbaytel 2019 ONCA 197, the Ontario Court of Appeal confirmed that in the right (or wrong) circumstances, hiring that candidate can constitute a constructive dismissal vis-a-vis other employees.

The case is also a reminder that plaintiffs who over-reach in their claim can be on the hook for costs even if they are successful.

Background

The Appellant, Linda Colistro (“Colistro”), was employed by the Respondent, Tbaytel, and its predecessor, the City of Thunder Bay (the “City”), as an administrator.

In January 2007, Tbaytel announced that they were hiring Steve Benoit (“Benoit”) as its Vice-President of Business Consumer Markets. On February 1, 2007, Colistro advised Tbaytel that as a result of the announcement, she was “not eating or sleeping, was vomiting and on the verge of a nervous breakdown”. She also provided a note from her doctor advising that she would be off work due to stress.

When Tbaytel made inquiries into the circumstances surrounding Benoit’s termination, they discovered that there had been allegations of sexual harassment against him. Although he had not been interviewed by the City when it conducted its investigation and his employment was not terminated for cause, the complaints of sexual harassment were part of the reason for his dismissal. 

On February 6, 2007, Tbaytel wrote to  Colistro advising her that they had decided to go forward with the hiring of Benoit. The letter indicated that they took her “accusations of 11 odd years ago seriously and will discuss appropriate behaviour with Mr. Benoit”. Tbaytel also offered to accommodate Colistro by transferring her to an equivalent position in an adjacent building. The letter also stated that Tbaytel saw “no legal or other reason not to go forward with hiring Mr. Benoit” and advised Colistro to proceed as she saw fit if this decision was unacceptable to her. 

Consequently, Colistro commenced her action against Tbaytel and the City.

Constructive dismissal

Trial judge’s decision

The judge agreed that Colistro was constructively dismissed on February 6, 2007. The judge found that the February 6, 2007 letter was “demeaning and dismissive” and that Tbaytel’s conduct “re-victimized” Colistro and minimized Benoit’s past conduct in the eyes of Colistro and other Tbaytel employees. The judge also noted that Tbaytel was aware of the negative impact Benoit’s hiring was having on Colistro and “an objective bystander, aware of all the facts, would find that continued employment with Tbaytel in these circumstances was intolerable.”

Colistro was awarded twelve months pay in lieu of notice and moral damages in the amount of $100,000.00.  

Court of Appeal decision

The Court of Appeal agreed that Colistro was constructively dismissed.

The Court noted that constructive dismissal arises when an employer’s conduct makes it clear that they no longer want to be bound by the employment contract. Courts have adopted two approaches to determine whether an employer’s conduct conveys an intention not to be bound by the employment contract.

The first requires identifying whether an implied or expressed term has been breached and then determine whether the breach was sufficiently serious to constitute constructive dismissal.

In the second, the court looks at whether the “employer’s conduct more generally shows that the employer intended not to be bound by the contract.” This approach allows a court to conclude that an employee has been constructively dismissed without identifying a term of the contract that has been breached.

The trial judge relied on the second approach in concluding that Colistro was constructively dismissed. Tbaytel argued that the trial judge erred in concluding that the second approach could be triggered by a single act, namely the February 6, 2007 letter. The Court disagreed. The Court held that “a stand-alone incident can render an employee’s continued employment intolerable”, whether or not it does, depends on all the circumstances.

In this case:

  • Colistro was sexually harassed by Benoit eleven years earlier.
  • Tbaytel knew that Benoit was the subject of sexual harassment complaints by Colistro and others and that this was one of the reasons for his termination.
  • Colistro had an unblemished twenty-year history with Tbaytel.
  • Tbaytel knew the negative impact Benoit’s hiring was having on Colistro.

In the circumstances, the Court held that the trial judge was not wrong in concluding that “a reasonable person would see [Colistro’s] continued employment as intolerable.

The Court also found that there was an overlap between the first approach and the second approach in this case. The Court noted that previous cases have found employees to be constructively dismissed based on an employer’s breach of an implied term or duty to treat the employee with “civility, decency, respect and dignity” or to ensure that “the work atmosphere be conducive to the well-being of its employees.” The Court concluded that the trial judge could have approached his task by considering whether Tbaytel had breached an implied term and whether the breach was sufficiently serious to constitute constructive dismissal. 

Intentional infliction of mental suffering

Trial judge’s decision

Colistro had asked for $3,032,601.82 in damages for Intentional Infliction of Mental Suffering. The judge concluded that the evidence did not prove that Tbaytel “knew that the kind of harm suffered by [Colistro] was substantially certain to follow from their hiring of Mr. Benoit” and therefore denied those damages.

Court of Appeal decision

The Court found that the trial judge erred in law by imposing a requirement that Tbaytel had to know the exact kind of harm that she suffered was substantially certain to follow, including her specific diagnosis. The Court noted that a finding that Tbaytel knew that its February 6, 2007 letter was “substantially certain to cause the appellant serious psychological injury would have sufficed to satisfy the second element”.

Nevertheless, the Court upheld the trial judge’s decision. The Court held that for the second element to apply, Colistro needed to establish that Tbaytel “subjectively knew that the serious psychological injury which ensued was substantially certain to occur.”

Costs

Despite being successful in her claim for constructive dismissal, and recognition from both courts that she was treated badly by Tbaytel, Colistro was ordered to pay $200,000.00 in costs ($150,000.00 to Tbaytel and $50,000.00 to the City).

Although our litigation process is based on a “loser pays” approach, given the damages that Colistro was claiming for intentional infliction of mental suffering, her lack of success on that point, and the fact that the damages she received amounted to less than 4% of the amount she claimed, the Court found that Tbaytel and the City were the substantially successful parties.

By Anique Dublin and Stuart Rudner

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Rudner Law, Employment / HR Law & Mediation

Employment Lawyers and Mediators at Rudner Law
Rudner Law specializes in Canadian employment law and mediation. Rudner Law provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. Stuart Rudner is a leading HR Lawyer and founder of Rudner Law. Stuart and his team speak and write frequently on HR Law issues. Read more
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