When an employee claims constructive dismissal, he or she usually quits and claims damages for wrongful dismissal. The employee then has an obligation to mitigate his or her damages by looking for other work. In a recent case, Russo v. Kerr, 2010 ONSC 6053, Mr. Russo claimed constructive dismissal and, rather than quitting, he continued working for Kerr for over a year in order to mitigate his damages. The court considered whether this continued employment represented condonation and therefore an acceptance of the new terms of employment.
Mr. Russo was employed by Kerr for 37 years, first as a shipping clerk and then as a warehouse manager. As a result of financial difficulties, the new president of Kerr asked all employees to accept a 10% pay reduction. He decided to further decrease the salary of four employees, including Mr. Russo, whose annual salary was reduced from $114,000 to $60,000.
A week and a half after the second reduction to his salary, Mr. Russo hired a lawyer. The lawyer wrote a letter to Kerr stating that the changes to Mr. Russo's employment constituted constructive dismissal and were not accepted or agreed to by Mr. Russo. After the letter was sent, Mr. Russo continued to work for Kerr in the same position, with the same duties and earned the reduced salary of $60,000 per year.
There was agreement between the parties that Mr. Russo had been constructively dismissed. However, among other issues, Justice Gray considered whether, by continuing to work for Kerr under the new terms of employment, Mr. Russo had condoned or accepted the new terms or whether he was mitigating his damages but still entitled to damages. In concluding that Mr. Russo was justified in continuing his employment on the new terms as a means of mitigating his damages, Justice Gray relied upon the letter from Mr. Russo's counsel to Kerr. The letter made it clear that Mr. Russo viewed the unilateral change to the terms and conditions of his employment as a constructive dismissal and also made it clear that he did not consent to or accept the change.
Justice Gray went on to say that when a constructive dismissal occurs both the employee and employer are required to make choices. If an employer is told by an employee that he or she does not accept new terms and conditions, the employer can either (a) ask the employee to leave the workplace; or (b) keep the previous terms and conditions in place for the reasonable notice period. In this case, Kerr did not choose either of these options. Instead, Kerr allowed Mr. Russo to continue in his employment knowing that he believed that he had been constructively dismissed and that he did not accept the new terms of employment. Justice Gray took this to mean that Kerr must have understood that although Mr. Russo was remaining in the workplace, it was not under the acceptance of the new terms and conditions of employment.
Although Mr. Russo was free to remain in the workplace in an effort to mitigate his damages, Justice Gray stated that an employee is only permitted to remain in the workplace as a way of mitigating his damages for the period of reasonable notice. If an employee remains in the workplace for longer, he or she will be seen to have accepted the new terms and conditions of employment.
What do employers need to know?
- When an employee claims constructive dismissal and remains in the workplace, the employer has choices
Employers should not assume that the employee has accepted the new terms of employment based on his or her continued employment. Instead, if an employee objects to the changes and claims constructive dismissal, the employer can either (a) ask the employee to leave the workplace; or (b) keep the old terms and conditions in place for the duration of the reasonable notice period. An employer may allow the employee to continue working in an effort to mitigate his or her damages until the end of what would be the reasonable notice period.
- Employees can claim constructive dismissal while they are still employed
Actively employing someone who is claiming constructive dismissal can be a daunting scenario. Employers who are faced with this situation and who are interested in other options would be well advised to speak with an employment lawyer.
- Constructive dismissal remains a tricky area of the law to navigate
As the case law in the area of constructive dismissal continues to evolve, more and more intricacies present themselves. Employers should tread with caution and obtain professional assistance when required.
Once the defendant has been told that the plaintiff accepted that a constructive dismissal had occurred, and that he did not accept the new terms and conditions, the defendant could have told the plaintiff to leave the workplace. Alternatively, the defendant could have kept the old terms and conditions in place for the period of reasonable notice.