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Not so constructive feedback: Employer’s unilateral changes result in constructive dismissal

A recent Ontario Superior Court decision highlights the risk of constructive dismissal claims in the aftermath of a merger and the significant costs that such claims can bring.

In Robinson v. H.J. Heinz Company of Canada LP, Stinson J. found that the Plaintiff, a long term employee of the Defendant, had been constructively dismissed when the Defendant progressively stripped responsibilities from her position after a merger. While this decision is notable for the finding of a constructive dismissal, it is particularly interesting in its treatment of the employee’s mitigation efforts and mitigation expenses.

The facts of this case were fairly straightforward. The plaintiff joined Heinz in November 1999 as a supervisor in accounts payable. She operated out of southwestern Ontario. Over the years, she rose through the ranks to a senior managerial position. In 2013, Heinz was acquired by new owners and the plaintiff’s facility was to be shut down. The plaintiff was asked to stay on with the company in a new role that required a move to Toronto. The plaintiff accepted the role, on the understanding that she would take on more responsibility as the lead for a new project, obtain a pay increase, and be exposed to more senior decision makers.

The Plaintiff’s facility shut down in June, 2014 and she began her role in Toronto. Subsequently, Heinz merged with another company, Kraft, on July 1, 2015. Between the period of July and September, 2015, the Plaintiff’s responsibilities were significantly diminished. She was no longer the lead of the new project, her subordinate whom she worked with since 2002 was moved to another division, and she was no longer in charge of certain roles that resulted in an approximately 40% diminishment in her responsibilities. Contemporaneous e-mails supported the Plaintiff’s claim that the changes were made unilaterally, without her consent. Based on these changes and a serendipitous opportunity with another company in Southwestern Ontario, the plaintiff gave notice of her resignation on September 8, 2015, effective September 25, 2015. The plaintiff claimed she had been constructively dismissed. The plaintiff subsequently sold her new home in Mississauga and returned to Southwestern Ontario where she immediately took on a new position, albeit at lower pay.

Following the decision of Potter v. New Brunswick Legal Aid, [2015] 1 S.C.R. 500, Swinton J. had no problem finding the Plaintiff had been dismissed under either branches of the test for constructive dismissal. Swinton J., determined that a reasonable person in the plaintiff’s position would have considered the employer to have unilaterally changed the contract of employment and that the reasonable person would conclude that the employer no longer intended to be bound by the terms of the contract. The parties agreed that if she was found to be dismissed, she was entitled to 15 months reasonable notice, inclusive of 23.8 weeks of statutory notice and severance pay.

Although the parties agreed that her statutory pay was not subject to deduction for mitigation, the Defendant attempted to argue that the full amount of the claimant’s mitigation efforts should be deducted from the balance of her common law damages. Swinton J. disagreed. Finding herself bound by the Ontario Court of Appeal decision Brake v. PJ-2MR Restaurant Inc., 2017 ONC 402, Swinton J., determined that when calculating the damage award on account of her common law notice, no mitigation income earned during the first 23.8 weeks immediately following her dismissal would be deducted. This effectively resulted in the Plaintiff earning her full salary from Heinz, in addition to her new salary for a period of almost 6 months.

Finally, Swinton J., accepted that Plaintiff was entitled to $45,010.32 in “mitigation expenses” attributed to the expenses on the sale of her home in Mississauga, expenses on the purchase of a new home in Southwestern Ontario, and moving and transitional expenses while the plaintiff commuted from Mississauga during the transfer period. Swinton J. accepted that the weight of authority in Ontario supported the recovery of real estate commissions, moving expenses and legal fees resulting from a wrongful dismissal, and more broadly an entitlement to recover the value of all losses from the failure to have been given reasonable notice. Notably, because the Plaintiff was induced to move to Toronto, Swinton J., found it “reasonably foreseeable that if the Defendant breached their contract the Plaintiff’s damages would include the cost of relocating” closer to her new employment. Swinton J. rejected the Defendant’s claim to a deduction for the capital gain the plaintiff experienced in selling her Mississauga home.

Parting thoughts for employers

This decision is an example of how mergers can result in significant challenges for organizations. Where new structures and procedures are being put in place, it is essential that employees, particularly high level managers, are engaged in the process or provided sufficient notice of the changes. In the present case, the employer’s changes were abrupt and unilateral. When the plaintiff expressed her concerns, the judge accepted that these concerns were effectively ignored. Similarly, where an employer induces an employee to relocate, a subsequent breach may result in increased exposure to mitigation costs.

Parting thoughts for employees

This decision is a key example of the importance of documenting changes in the workplace. The plaintiff’s evidence was largely accepted because she created a proper paper trail of her concerns. Similarly, where an employee is dismissed from their employment and incurs expenses in order to mitigate their losses, these expenses may ultimately be the responsibility of the employer.

Robinson v. H.J. Heinz Company of Canada LP, 2018 ONSC 3424 can be found here.

Devan Marr

Devan Marr is a lawyer at Strigberger Brown Armstrong LLP. With two offices located in Toronto and Kitchener/Waterloo, the firm offers a full range of legal services to our industry partners in insurance and risk management. The firm aims to provide its clients with focused, practical, and cost efficient legal advice. Devan primarily defends insurance claims with a particular interest in the intersection of the contractual, statutory and common law obligations of parties in long-term disability and employment practice liability claims. His practice also includes providing employment related legal advice to both employers and employees in the context of contract negotiations, evaluation of termination clauses, workplace investigations, and assessment of exposure to wrongful dismissal claims.

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