Where an employer unilaterally fundamentally or substantially changes the terms and conditions of employment, it is possible that an employee will raise an allegation of constructive dismissal, seeking notice and severance obligations under the applicable employment standards legislation, pursuant to an employment contract or, more frequently, common law notice of termination obligations.

Often at issue in such cases is whether the employer’s action actually constitutes a change in a fundamental term or condition of employment.  The Ontario Superior Court of Justice considered whether employers’ actions to manage employees’ performance constitute constructive dismissal in its decision of Iliescu v Voicegenie Technologies Inc.[1]

Employee Crinu Iliescu had been employed by Voicegenie Technologies Inc. for a little over one year when issues with his performance began.  Mr. Iliescu was put on a performance improvement plan and his computer access and security card were shut down.  Mr. Iliescu alleged that his employment was terminated as a result of these actions and he refused to attend at work, at which point his employment was terminated due to insubordination and had abandonment of his position.

The Court found that the performance improvement plan was balanced, fair and well-formulated, and that the employer was trying to “salvage a productive working relationship”.  An employer is entitled to require a minimum level of performance and it was not open to the employee to reject the performance improvement plan outright.

After finding that Mr. Iliescu was not constructively dismissed the court stated that, in the event it was incorrect in this conclusion, the employer is not liable for damages for wrongful dismissal.  This is because the employee has a duty to mitigate by returning to work at the dismissing employer absent an atmosphere of hostility, embarrassment or humiliation.  Therefore, any damages he may have been entitled to would have been entirely offset by amounts he would have earned had he returned to work at his employer.

A similar conclusion was recently upheld by the Ontario Court of Appeal in Chevalier v Active Tire & Auto Centre Inc.[2]  The employee Earl Chevalier had been employed for a total of 33 years with Active Tire & Auto Centre Inc. (“Active Tire”) and its predecessor, Speedy Muffler, when his employment was terminated in October 2008.

In the year following Active Tire’s acquisition of several Speedy Muffler locations, Active Tire experienced some performance issues with Mr. Chevalier, and provided a manager/coach to train and assist Mr. Chevalier so that he could meet the requirements of his employment contract.  Additionally, there were business issues that required Mr. Chevalier to work at other Active Tire locations, although he travelled on company time and at the company’s expense.

Ultimately, Active Tire laid-off Mr. Chevalier for lack of work and he brought an action for constructive dismissal.  Active Tire sought legal advice and, upon learning that it could not lay off Mr. Chevalier, it apologized for its mistake in laying him off, and called Mr. Chevalier back to work.  Mr. Chevalier refused to return to work.

At trial, Active Tire conceded that it had constructively dismissed Mr. Chevalier, but claimed that Mr. Chevalier failed to mitigate his damages when he refused to return to work at Active Tire.  Mr. Chevalier took the position that he should not be required to return to work in an atmosphere of hostility, embarrassment or humiliation.  He alleged that his employer engaged in unfair criticism of his work, treated him in a demeaning fashion and ignored his contractual rights by making him work at another location.

The Court found that Mr. Chevalier failed to mitigate his damages when he refused to return to work at Active Tire – the actions of Active Tire were aimed at improving Mr. Chevalier’s performance, not at driving him from the company.  The employer was entitled to assist Mr. Chevalier in meeting the terms of his employment agreement.  Furthermore, Mr. Chevalier was not assigned to work at other locations as part of a campaign to cause him to leave the company, but for valid business reasons.

This conclusion is notable because the employer made the return-to-work offer to Mr. Chevalier after he had left the company and had commenced his action in wrongful dismissal – considerations that usually militate towards a finding that the employee need not return to work at the previous employer in order to mitigate his or her damages.

Take away

Employers can manage the employees’ performance without triggering an action for constructive dismissal by clearly setting out the areas where the employee must improve, providing metrics that the employee must meet, and offering assistance to the employee, so that the employee fully understands what the employer expects and is able to respond to the employer’s concerns.  A balanced, fair and well-formulated performance improvement plan will not likely ground a successful claim for constructive dismissal.

Furthermore, where an employer addresses bona fide performance issues in a balanced and fair manner, its actions will likely not, on its own, support an employee’s allegation of an atmosphere of humiliation, embarrassment and hostility.  As such, an employee will likely be required to return to work in order to mitigate his or her damages in wrongful dismissal