With the collaboration of Brittany Carson, articling student
In the case of St-Hilaire c. Nexxlink
inc.1 the Court of Appeal of Québec analyzed
the concept of "constructive dismissal" in the specific
context of a business acquisition.
In this case, Nexxlink was the subject of an acquisition that
resulted in a series of changes to the business, some of which
affected the employment conditions of Mr. St-Hilaire. Believing
that this had resulted in substantial changes to the essential
conditions of his employment contract, Mr. St-Hilaire left his
employment shortly after the transaction, alleging that he had been
constructively dismissed. He claimed $525,000 in damages from
Nexxlink.
The Court of Appeal affirmed the decision of the Superior Court,
holding that Mr. St-Hilaire had not been constructively
dismissed.
According to the criteria laid down by the Supreme Court of
Canada, constructive dismissal involves [translation] "1) a
unilateral decision by the employer, 2) a substantial change or
changes to the essential terms of the employment contract, 3) the
employee's refusal of the changes, and 4) the employee's
departure."2 These criteria are assessed from the
perspective of a reasonable person placed in the same
situation.3
In the context of the transaction in this case, the change in the
title of Mr. St-Hilaire's position from vice-president,
business development to vice-president, infrastructure equipment
sales did not amount to a substantial change in his employment
conditions nor a demotion, but rather a change in the organization
of the business, which was within the management rights of
Nexxlink.
With respect to the changes alleged by Mr. St-Hilaire to his
responsibilities and target market, these were only fears. In the
context of a business acquisition, some of the senior
executives' duties may be changed or clarifi ed over time:
[translation] "a period of uncertainty or adjustment is
entirely foreseeable". According to the Court, a reasonable
person placed in the same context as Mr. St-Hilaire could have
foreseen that he would have retained his client accounts, and that
various opportunities could be expected within the new
business.
With regard to Mr. St-Hilaire's compensation, it consisted
primarily of a base salary of $170,000, a $40,000 bonus plan, and
20,000 stock options at the time he started his employment.
Contrary to Mr. St-Hilaire's allegations, the Court found that
the criteria for awarding the annual bonus had not been
substantially changed. Moreover, even if this had been the case,
his employment contract expressly stated that the bonus plan could
be changed simply upon the approval of the board of directors. As
for the cancellation of the stock options, even if this could be
considered to be a reduction in Mr. St-Hilaire's compensation,
he never complained about it before leaving the company. According
to the Court, Mr. St-Hilaire undoubtedly did not feel that this was
an essential condition.
In conclusion, the Court of Appeal found that Mr. St-Hilaire was
aware of the role that was reserved for him in the new business.
The structure he complained of was temporary and uncertain. In the
context of this transaction, the allegations of constructive
dismissal were ill founded.
The interest of this decision lies in the fact that it relativizes
the concept of constructive dismissal in the specific context of a
business acquisition, in addition to reiterating the principle that
the structure of a business is not bound to remain static.
1 2012 QCCA 1513 (C.A.)(affi rming 2010 QCCS 2276 (S.C.)).
2 Id., para. 29, citing Farber v. Royal Trust Co., [1997] 1 S.C.R. 846 (hereinafter "Farber").
3 Farber, para. 26.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
