While easy to express, the test for determining whether a particular change in the terms of employment amounts to a constructive dismissal is practically complicated. Furthermore, under what circumstances is an employee required to remain at work under the altered employment terms in mitigation of his or her damages arising from a constructive dismissal?
The plaintiff alleged that he had been constructively dismissed when his remuneration was reduced by his employer during the course of the last two projects he was assigned to work on. Dominion argued that Mr. Piron was not constructively dismissed, resigned his employment and, in any event, failed to mitigate his damages by continuing his employment with the Dominion at the level of remuneration offered at the time he left the company.
The Trial judge held in favour of Mr. Piron. Specifically, the court found that Mr. Piron had been constructively dismissed, that he was entitled to a common law reasonable notice period of 15 months and was awarded damages based on his base wages. The trial judge refused to award damages in respect of unpaid bonuses in the period leading up to the constructive dismissal and during the notice period.
Dominion appealed and Mr. Piron cross-appealed.
The Court of Appeal reversed the Trial Judgment on the awarding of the bonus issue, but dismissed Dominion’s appeal.
In doing so, the Court reviewed the law of constructive dismissal and the applicable test found in the Supreme Court of Canada judgment of Farber v. Royal Trust Co.  1 S.C.R. 846:
[I]t has been established in a number of Canadian common law decisions that where an employer unilaterally makes a fundamental or substantial change to an employee’s contract of employment – a change that violates the contract’s terms – the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed.
The Court of Appeal distilled this as follows:
As I see the matter, a unilateral fundamental or substantial change to an employment contract is a fundamental breach which is tantamount, when viewed objectively, to the employer evincing an intention not to be bound by the contract.
The Court agreed with the Trial judge in concluding that, in the circumstances, Mr. Piron had been constructively dismissed.
On the issue of mitigation, and specifically remaining with the employer in the altered position, the Court considered the Supreme Court of Canada judgment in Evans v. Teamsters Local Union No. 31 1 S.C.R. 661:
Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity. In 1989, the Ontario Court of Appeal held that a reasonable person should be expected to do so “[w]here the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious” (Mifsud v. MacMillan Bathurst Inc. 1989 CanLII 260 (ON CA), (1989), 70 O.R. (2d) 701, at p. 710). In Cox, the British Columbia Court of Appeal held that other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and whether the offer of re-employment was made while the employee was still working for the employer or only after he or she had already left (paras. 12-18). In my view, the foregoing elements all underline the importance of a multi-factored and contextual analysis. The critical element is that an employee “not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation” (Farquhar, at p. 94), and it is that factor which must be at the forefront of the inquiry into what is reasonable. Thus, although an objective standard must be used to evaluate whether a reasonable person in the employee’s position would have accepted the employer’s offer (Reibl v. Hughes, 1980 CanLII 23 (SCC),  2 S.C.R. 880), it is extremely important that the non-tangible elements of the situation — including work atmosphere, stigma and loss of dignity, as well as nature and conditions of employment, the tangible elements — be included in the evaluation.
Although the Court of Appeal found Dominion’s arguments “attractive”, it was bound by appeal principles and specifically, that it would only overturn a trial judgment where the judge made an extricable legal error (also expressed as a “palpable and overriding error”).
On that point, the Court of Appeal relied upon the following:
- The judge found Dominion to be unresponsive to Mr. Piron’s concerns.
- He found it more instructive to consider the company’s actions at the time of the constructive dismissal than after the matter had been put in the hands of counsel.
- His conclusion that the constructive dismissal involved a loss of status within the company by returning Mr. Piron to a position he had occupied many years earlier shortly after he joined the company.
- The trial judge commented adversely on some aspects of the evidence given by the Company's witnesses.
The Court of Appeal refused to interfere with the trial judgment.
In terms of the bonus, the Court of Appeal found that the trial judge erred in failing to award unpaid bonuses prior to the constructive dismissal and through the 15 month notice period. The Court awarded $20,000 in respect of unpaid bonuses and increase the damages for the notice period by $12,500.