In Manastersky v Royal Bank of Canada (2019 ONCA 609) the Ontario Court of Appeal analyzed what happens when the employer terminates a investment fund from which the employee derived a substantial part of his income.
The Plaintiff ran some specific investment funds for the Bank and received payments over time based on how those funds performed.
The Bank decided that they were no longer going to continue those specific funds anymore and proceeded to wind them down. Part of the wind down consisted of terminating the Plaintiff. The Bank agreed and did pay him the amount that the fund paid out over the notice period, however this number paled in comparison to what he was earning while these funds were active.
The trial judge awarded him damages based on his historical earnings over the 18 month notice period. This came to $953,000 for this compensation item alone.
The Court of Appeal said NO.
They reiterated that the analysis has two steps:
First, what would the employee had earned if he had been permitted to work out the notice period?
Second, is there any contractual language which would limit the employee’s entitlement to the monies referred to in the first step?
In this case the trial judge held that by cancelling the funds, the employer would have constructively dismissed the plaintiff as it deprived him of the opportunity to earn income from those funds.
This is how the Court of Appeal dismissed that argument:
67] With respect, I do not see how RBCDS’ termination of the Mezzanine CIP in accordance with its terms, which were known and agreed to by Mr. Manastersky, could amount to conduct by an employer that evinces an intention to no longer be bound by the employment contract: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10,  1 S.C.R. 500, at para. 30. The termination of the Mezzanine CIP did not involve any breach of contract by RBCDS. As the trial judge recognized, the CIP’s termination was “consistent with the terms of the CIP”.
 Nor did the CIP’s termination “more generally [show] that the employer intended not to be bound by the contract” or demonstrate “conduct that, when viewed in the light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract”: Potter, at paras. 33 and 42. Mr. Manastersky was hired to manage specific funds. At the time of his offer of employment, he was provided with a copy of the 2000 Plan. Mr. Manastersky signed the 2006 Mezzanine CIP. Those plans contained the same Article 9.3, which clearly disclosed that one risk embedded in Mr. Manastersky’s contract of employment was that the Management Committee could terminate the plan effective as of the end of any Investment Period with respect to future Investment Periods.
 By terminating the Mezzanine CIP, RBCDS was not evincing an intention not to be bound by the employment contract. On the contrary, it was exercising a fully disclosed right it had under the contract of employment. Consequently, I see no evidentiary support for the trial judge’s finding that a termination of the Mezzanine CIP would have amounted to a constructive dismissal.
Imagine this somewhat different scenario:
You are a car salesman and paid only commission. 90% of your sales are pickup trucks and only 10% are cars. Your employer decides one day that they are no longer going to sell pickup trucks after they get rid of the 10 remaining trucks on the lot . Your income drops by 90%.
How is that not a constructive dismissal?
It is fundamental principle of employment law that in return for one’s labour the employer agrees to pay the agreed wage.
Is it also not a fundamental principle that in exchange the employer has to provide one with work from which the employee can derive one’s income?
By cancelling the investment funds upon which the plaintiff derived the bulk of his income how can that not be “evincing an intention not to be bound by the employment contract”?
Applying the Bhasian principle of good faith administration of a contract, is it good faith for an employer to take away the main source of income of an employee and not replace it with something comparable ?
In this case, as in other recent OCA cases that I have blogged about, the Court is now giving greater emphasis to the contractual language of the various bonus and commission plans as opposed to the principles of interpretation generally applied to employment contracts as set out in the seminal case of Wood v Fred Deeley.
I note that this change seems to have accelerated since the retirement of Mr. Justice Laskin, the author of Wood v Fred Deeley.
Perhaps one day the Supreme Court of Canada will weigh in on this issue as to whether employment agreements are to be read like commercial agreements or like consumer contracts given the imbalance of bargaining power that exists in most employment situations.
- Employer wacked with $55,000 of moral and punitive damages - November 28, 2022
- Terminating an employee without reasonable notice results in employer paying for 26 years of LTD benefits - November 14, 2022
- ONCA upholds 10 months notice period for short service director - October 17, 2022