In a story that gained wide national attention, the Ontario Court of Appeal recently upheld a decision from the Ontario Superior Court, which found an employee’s ability to find new job after being constructively dismissed, did not negate her rights to pay in lieu of notice.

A Finding of Constructive Dismissal

The Employee was 62 years old when she was terminated from her position with the Employer, PJ-M2R (a franchise holding company which owned several McDonald’s locations).

She had worked for the Employer and for other McDonald’s locations for more than 25 years, progressively working her way up through the management chain.  The Employee had received ten years’ worth of positive performance reviews. It was not until November 2011 that she received her first negative assessment.

Following this singular negative performance review, she was subsequently transferred from the restaurant she managed to one of the worst performing McDonald’s locations in the country. The Employee then received another negative assessment three months into managing the new store and was placed on the Goals Achievement Process (“GAP”), the Employer’s progressive discipline program. After just over three months, the Employer advised her she had failed the GAP program and had a choice between demotion to First Assistant or termination. She ultimately rejected the demotion, and was terminated.

Following the termination, the Employee tried to find comparable employment, immediately working full time hours at a grocery store where she had previously worked part-time. She also attempted to set up babysitting and cleaning companies, but was unsuccessful in doing so.

The Employee took the Employer to court in November 2012, where the Ontario Superior Court of Justice found her to have been constructively dismissed.

The Trial Judge found that the Employee, while not a perfect employee, had enjoyed a long track record of successful performance.  Even though she had experienced a rough patch in 2011, her performance during that time should not have been looked at in isolation. The Employer ultimately made a substantial and fundamental change to the Employee’s employment contract, resulting in her constructive dismissal.

On Appeal

On appeal, the Employer argued the Trial Judge had erred in five ways. All five of these arguments were rejected by the Court of Appeal. The alleged errors were:

  1. Failing to give adequate reasons for his findings of fact and credibility determinations.The Court held the Trial Judge had provided adequate reasons, and that credibility determinations were findings of fact with no obvious mistakes which would warrant them being overturned.
  1. Finding that (the Employee) had been constructively dismissed;The Court of Appeal agreed with the Trial Judge’s assessment that when the Employer had “offered (the Employee) the non-supervisory position as First Assistant, with ‘meaningfully inferior’ benefits, it unilaterally made a substantial or fundamental change to her employment contract. In so doing, it constructively dismissed her.” In addition, the Court of Appeal held there was no grounds for termination with cause in light of the Employee’s long-term performance history.
  1. Failing to find that (the Employee’s) decision not to accept the offer of continued employment as a First Assistant amount to a failure to mitigate her damages, thus disentitling her to any damages;Employees have a positive obligation to mitigate their damages following termination which includes accepting comparable available employment. However, that obligation is subject to an objective standard – in this case what a reasonable person in the Employee’s position would have been expected to accept. The Trial Judge had found a reasonable person in the Employee’s position would not have accepted the First Assistant position. The Court of Appeal agreed.
  1. Setting the notice period at 20 months;While the Employee had worked for McDonald’s for 25 years, she had only worked for the Employer (ie. PJ-M2R) for 13 years. However, the Employer had already credited the Employee’s previous time at 50% for the purposes of the calculation of benefits. The Trial Judge used this same calculation in determining the notice period and the Court of Appeal agreed.
  1. The treatment of mitigation during the notice period.The employee was awarded $104,499.33 at trial, an amount made up of salary, $6,000 car allowance, $1,307.76 cell phone allowance and $2,391.84 in health benefits. Again, the Court of Appeal upheld the Trial Judge’s calculations and made no changes in damages.

The Employer still has the opportunity to seek leave to the Supreme Court of Canada, so the Employee’s story is not necessarily over yet.

What Does This Mean for Employers?

Employers should be aware of how they are disciplining an employee and whether it could be viewed as unfair or arbitrary by the courts. In addition, employers should be cognizant to the fact that demotions and other unilateral changes to someone’s employment could be construed as constructive dismissals.

What Does This Mean for Employees?

Employees should be aware of their rights when faced with accepting unilateral changes to their employment. Making a decision not to accept a demotion does not necessarily mean termination is warranted.

Contact the offices of Grosman Gale Fletcher Hopkins LLP online or by phone at 416-364-9599 if you are an employee and believe you may have been terminated without cause or if you are an employer considering disciplining or demoting an employee. We can work with you to assess your unique circumstances.


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