All pay and no work? That’s constructive dismissal!

April 9, 2015 Alison J. Bird Employee Relations, Employment/Labour Standards, HR Policies and Procedures, Human Resources, Notice, Damages and Settlements, Payroll, Pensions and Benefits, Recruiting and Hiring, Wages and Compensation

Last year, we discussed a case which held that preventing an employee from working during a purported “working notice” period can constitute constructive dismissal. The rationale for the decision was that unilaterally preventing an employee from performing their duties (even when they’re still receiving their pay and benefits) is a fundamental change to the terms of employment. In Thompson v Cardel Homes Limited Partnership, 2014 ABCA 242, the Alberta Court of Appeal again affirmed this principle, but in different circumstances. This case highlights the dangers of preventing an employee from working, and the importance of carefully drafting employment contracts.

Thompson was employed under a fixed term contract. One month before the expiry of the fixed term, the employer gave him a letter notifying him that it would not be entering into a new agreement with him. The letter went on to advise him that he would not be required to attend at work for the remainder of the term, but that he would continue to receive his pay and benefits. The letter also instructed him to immediately return his keys and his computer password.

Thompson brought an action against the employer alleging that he had been constructively dismissed and that, as a result, he was entitled to a 12-month contractual severance payment. The fixed term contract provided that if Thompson’s employment was terminated before the end of the fixed term, he would be entitled to receive a lump sum payment of 12 months of salary.

The employer argued that it did not terminate Thompson’s employment before the end of the fixed term. It submitted that the letter was simply notification that his contract would not be renewed at the end of the term, and that it had relieved Thompson of his duties as a favour to him so that he could start looking for new employment.

The Court of Appeal rejected the employer’s arguments. It found that the employer had unilaterally denied Thompson the opportunity to continue performing his duties until the end of the term. The Court concluded that employer’s actions, viewed objectively, constituted constructive dismissal.

The Court of Appeal noted that typically, the damages for the early termination of a fixed term contract would be the amount the employee would have earned until the end of the term. However, the parties in this matter had contracted otherwise and agreed that Thompson would be entitled to 12 months’ salary. The Court held that there was no reason to depart from what the parties agreed. Therefore, Thompson was entitled to the 12-month severance payment notwithstanding the fact that he was only dismissed 1 month before the end of his fixed term.

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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