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Constructive Dismissal and the Reasonable Employee

Posted on March 11, 2015 | Posted in Civil Litigation, Five Liners

Potter v. New Brunswick Legal Aid, 2015 SCC

Employer began negotiating a buyout of the employee’s contract. Before any deal was made, the employee went on sick leave. During the leave period, the employer suspended the employee with pay and delegated his powers to another employee.

At the same time, but unbeknownst to the employee, the employer prepared a letter of termination. When the employee received the notice of suspension, he requested reasons for it. After receiving none, he considered himself constructively dismissed and sued.

An employee must prove one of two branches to establish constructive dismissal:

(i) identify an express or implied contract term that has been breached and determine whether the breach is sufficiently serious to constitute constructive dismissal; or

(ii) determine whether, after reviewing the cumulative effect of past and present acts by the employer, the employer no longer intended to be bound by the employment contract.

For the determination of the first branch, the Court must ask whether, at the time the breach occurred, a reasonable person in the employee’s situation would have felt that the essential terms of the employment contract were being substantially changed. In making this determination, the court cannot consider evidence of information that was not known to the employee (such as the employer’s termination letter that had not been delivered).

After setting out the law referenced above, the Supreme Court of Canada (five person majority) considered that, in light of:

(i) the indefinite suspension; and

(ii) the fact that the suspension was not authorised by the employment contract and was a substantial change to it,

there was a constructive dismissal under the first branch of the test. The termination letter was not to be considered, but would have been the icing on the cake. The minority agreed with the result, but would also have considered the termination letter.


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