Robinson v. H. J. Heinz Company of Canada LP, 2018 ONSC 3424 (CanLII)

Corporate restructuring results in constructive dismissal of employee.  

Date Heard: March 26 & 28, 2018 | Full Decision [PDF]

Material Facts

This Plaintiff began her career with Heinz Canada Ltd., in November 1999 with the accounts payable department and her employment ended in September of 2015 as the senior manager of accounting for Canada. During that period, she received several promotions of increasing seniority and responsibility. After a major corporate merger and re-organization her role was diminished and her future uncertain. She resigned and commenced proceedings for constructive dismissal. This Plaintiff obtained employment promptly, but at a reduced wage rate and with significant relocation costs. Adequate notice of this Plaintiff’s intentions were conveyed to her manager at that time, providing sufficient time to transition another into her role. This plaintiff requested a severance package, but none was offered.

Issues

1. Whether this Plaintiff was constructively dismissed?
2. If she was dismissed, what treatment should be given to her statutory entitlement for notice and severance?
3. Whether damages are recoverable on account of mitigation of expenses?

Brief Answer

This Plaintiff was entitled to 15 months’ notice in lieu of pay.

Analysis

Stinson J., summarized that the concept of constructive dismissal is founded on the general principle that where a party to a contract demonstrates an intention to no longer be bound by it, that party is committing a fundamental breach of the contract that results in its termination. The question to be asked is, citing Farber v. Royal Trust Co., [1997] 1 S.C.R. 846 (S.C.C.), ‘whether the acts and conduct of the party evince an intention no longer to be bound by the contract’.

Relying on the current test as set out in Potter v. New Brunswick (Legal Aid Services Commission), [2015] 1 S.C.R. 500, Stinson J., followed the two branch approach to constructive dismissal at paragraph [47] as:

The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps: first, the employer’s unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract . . . Once it has been objectively established that a breach has occurred, the court must turn to the second step of the analysis and ask whether, “at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed”. A breach that is minor in that it could not be perceived as having substantially changed an essential term of the contract does not amount to constructive dismissal.

The kinds of changes that meet these criteria will depend on the facts of the case being considered, so “one cannot generalize”. In each case, determining whether an employee has been constructively dismissed is a “highly fact-driven exercise” in which the court must determine whether the changes are reasonable and whether they are within the scope of the employee’s job description or employment contract. Although the test for constructive dismissal does not vary depending on the nature of the alleged breach, how it is applied will nevertheless reflect the distinct factual circumstances of each claim.

The second branch of the test for constructive dismissal necessarily requires a different approach. In cases in which this branch of the test applies, constructive dismissal consists of 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. The employee is not required to point to an actual specific substantial change in compensation, work assignments, or so on, that on its own constitutes a substantial breach. The focus is on whether a course of conduct pursued by the employer “evince[s] an intention no longer to be bound by the contract”. A course of conduct that does evince such an intention amounts cumulatively to an actual breach . . . .

Assessing the evidence, Stinson J., concluded that this Plaintiff met the criteria under the first branch as her employer was found to have:

1. Reassigned all of her payroll related functions to the HR department permanently eliminating her direct report of the payroll team;
2. Removed her title and all associated responsibilities as the ‘ZBB Lead for Canada”;
3. Demoted her position within the company hierarchy requiring her to report to an employee of equal rank, in place of the Controller of the company;
4. Informed her that the company planned to outsource the companies accounts payable functions and shut down her department; and
5. Advised that ‘it [employer] did not have any plans for her’.

In satisfaction of the second branch it was found that past dealings established practice whereby new roles and contractual terms had been negotiated by the parties during previous changes to the company over the years. Each new change resulted in a new contract. The Defendant made it clear that this time, this Plaintiff would not enjoy the promised status for which they had previously contracted. By doing so, the Defendant evinced an intention no longer to be bound by the contract.

In turning to the issue of notice and severance, statutorily, Stinson J., determined that 8 weeks pay in lieu of notice was required and 15.8 weeks worth of severance pay, totaling 23.8 weeks income. The point of contention lies in whether mitigation commences immediately or after the 28.3 week statutory period. The Defendants argued that these are damages and as such damages generally can be offset by mitigation, citing Boland v. APV Canada Inc., (2005), 250 D.L.R. (4^th) 376 (Ont. Div. Ct.). The Plaintiff argued that ESA entitlements are not subject to mitigation. As established recently in Brake v. PJ-M2R Restaurant Inc., 2017 ONCA 402 (Ont. C.A.):

Statutory entitlements are not damages. Ms. Brake was entitled to receive her statutory entitlements even if she secured a new full-time job the day after the Appellant terminated her employment. Therefore, the income that Ms. Brake earned during her statutory entitlement period is not subject to deduction as “mitigation income”.

Lastly, the Plaintiff owes an obligation to mitigate her losses upon breach of the employment contract. In so mitigating her losses, this Plaintiff took a job in southwestern Ontario at a reduced wage rate. She claims the ‘costs of her mitigation’ as she was required to transition into her new employment as well as her lost income. Citing Earl v. Northern Purification Services Ltd., [1980] O.J. No. 160 (Ont. H.C.) in Ontario, there is support for the recovery of real estate commissions, moving expenses and legal fees incurred by an employee as a result of a wrongful dismissal. Further it is accepted that an employee is entitled to recover the value of all loses from the failure to have been given reasonable notice of the termination of their employment: Paquette v. TeraGo Networks Inc., 2015 ONSC 4189 (Ont. S.C.J.).

In the present case, this Plaintiff was induced to move to Toronto to continue her employment for the Defendant. The new home purchased in Mississauga is directly tied to the Plaintiff’s mitigation efforts. It would be inequitable, Stinson J., stated at [78], to allow the Defendant to benefit from the mitigation efforts regarding her income loss claim, while at the same time denying her reimbursement for all costs incurred to achieve that positive outcome.

Conclusion

Stinson J., concluded at [48] that applying wither branch of the test, this Plaintiff was constructively dismissed. 15 months’ was agreed upon by the parties as the common law damage period. The Court found that the statutory period was 15.8 weeks. Income mitigation was to occur after that statutory period expired. The mitigation costs were Ordered in the amount of $45,010.32