Canada: Are There New Evidenciary Rules In Quebec For Proving Constructive Dismissal?

Last Updated: October 3 2012
Article by Théodore Goloff

Introduction

Farber vs. Compagnie Royal Trust, [1997] 1 S.C.R. 846, requires that for a change in working conditions be considered constructive dismissal, the element changed must be "substantive". Clearly, substantiveness must have an objective dimension. An ex-employee Plaintiff seeking to characterise an ostensible resignation as the result of a constructive dismissal must convince the Court that the condition of employment allegedly unilaterally and illegally changed by the employer was substantive enough to warrant a conclusion of almost frustration of contract. In St-Hilaire vs. Nexxlink, 2012 QCCA 1513, Quebec's highest court seems to have suggested new evidentiary considerations to be taken account of.

Facts

Plaintiff, as a condition of coming aboard as a Senior Vice-President of the company that ultimately acquired Nexxlink Inc., had negotiated a stock option plan which at the time of his ultimate separation of employment might have accounted for $40,000 to $50,000, a sum recognized by the Court as certainly "not negligible". Indeed, the Court of Appeal recognized that when dealing with a public company in full expansion mode, such as was the case with Nexxlink, in the information technology sector, holding stock purchase options may rightly constitute a reasonable expectation of significant economic gains for senior executives.

Several years after joining the Company, Nexxlink was bought by a subsidiary of Bell Canada. A reorganisation of responsibilities followed. An announcement that the share options purchase plan and the share options that St-Hilaire held were to be cancelled, ostensibly as a result of the acquisition followed as well. Six (6) weeks after the "closing", Plaintiff resigned, alleging constructive dismissal essentially because of a series of reorganization of responsibilities. Apparently, it was only at the time of the service of his attorneys' letter of demand that the issue of the cancellation of the share option plan and share options were raised as an issue.

Plaintiff sued seeking some $500,000 plus compensation for what he claimed was a "constructive dismissal". Having lost in first instance, Plaintiff sought reversal on several grounds.

The Appellate Decision

St-Hilaire first alleged that the Superior Court had wrongly taken account of evidence that showed that although there had been a redistribution of types of clients that were to be served by him, in fact, had he stayed on, this might well have led to a net increase or at least an equalisation of revenues to him. St-Hilaire argued that pursuant to Farber,above, the only pertinent factual elements to take into account were those that actually existed at the time or which a reasonable person finding themselves in the same situation might expect. This ground was dismissed by the Court of Appeal in view of the testimony of the employer's President regarding representations that he had made to St-Hilaire prior to his resignation to the effect that sales and service to large enterprises would be maintained and that the acquisition of Nexxlink by Bell represented real net opportunities for him. As a follow-up, the same Company President had represented that St-Hilaire's role, responsibilities, remuneration, benefits and client accounts would remain unchanged, notwithstanding acquisition by Bell.

The Appelate Court posited that the Trial Judge could not use the fact that no drastic change in the type of clientele dealt with by St-Hilaire prior to the takeover had, in fact taken place. Only the reasonable expectation of what might transpire, viewed at the time of St-Hilaire's departure could , in its view, be taken account of.

Nevertheless, in the Court of Appeal's view, the Trial Judge committed no error in determining that the evidence supported a finding that the acquiring company "Bell PME", "did not exclude in fact the possibility that St-Hilaire would continue to treat with large enterprises major accounts". "Bell PME n'exclut pas dans les faits la possibilité de transiger avec de grandes entreprises comptes majeurs"

The Court of Appeal need not have gone to such lengths to dismiss that ground of appeal in the undersigned's view. Cory J. in City (Toronto) Board of Education vs. O.S.S.T.F. District, 15, [1997] 1 SCR 487, clearly established that "subsequent event evidence" can be properly considered if it helps to shed light on the reasonableness and appropriateness of the action taken, that is the subject of the inquiry, even though such action was taken some time in the past. In the practitioner's view, the foreseeability or of unforeseeability of a set of circumstances, is one but not the only element to take account of to gage the reasonableness and the appropriateness of the action taken. If, as in the Board of Education Case, a letter written by the employee several months after termination was deemed not only pertinent but indeed essential to determining the reasonableness of the employer's action terminating the grievor's employ taken several months before, should not the same rules apply herein by analogy to determine how to properly characterize Plaintiff's resignation – voluntary quit or constructive dismissal? What's sauce for the goose is sauce for the gander! Indeed, the Toronto Board of Education case Cory J. relied upon Cie Minière Québec Cartier vs. Quebec (Grievances Arbitrator), [1995] 2 S.C.R. 1095 as authority for that finding. It was precisely that case that Gonthier J. referred to in Farber when he wrote:

"[42] ...Thus what is relevant is what was known by the Appellant at the time of the offer and what ought to have been foreseen by a reasonable person in the same situation. Evidence of events that occurred ex post facto achieved subsequent to the offer could reasonably have been foreseen at the time of the offer."

Interestingly, while Toronto (City) Board of Education supra (i) was decided a month prior to Farber, (ii) saw Gonthier J. as a member of the Court that decided that case, and the author of Farber, no mention is made of that case in Farber – only the reference to Cie Québec Cartier Minière. If Cory J.'s decision is the logical and necessary extension of Québec Cartier, one is left to wonder why no mention is made of Toronto Board of Education in Farber?

The Court of Appeal also found that:

  1. While there was substantive changes in job content, same did not exceed the latitude that the employer's rights of management were covered;
  2. If colleagues were prior, to the takeover, in positions parallel to St-Hilaire, hierarchically speaking, but post-closing were carrying out some of his work, this was as a result of the new employer's exercising management rights to reorganize work assignments and "promoting" those colleagues rather than demoting St-Hilaire. Those grounds failed as well;
  3. On the other hand, with respect to the cancellation of the share option purchase plan and the shares options themselves, the Court ruled that while there was a unilateral change in a substantive and substantial working condition - indeed, a working condition that was a key reason for plaintiff's joining the employer - since the letter of resignation, did not raise same as one of the causes or the causa causans, as it were, of the alleged constructive dismissal, it could not be relied upon to change an apparent voluntary resignation to one where changes in working conditions amounted to frustration of contract or it civil law equivalent.

What We Should All Learn From the Case

The take aways from this case are three fold:

  1. In cases of mergers and acquisitions, not all changes in job content or responsibilities satisfy the Farber test of substantiality. As in the earlier decision in Lemieux vs. Marsh Canada Ltée, the Quebec Court of Appeal demonstrated some recognition that mergers acquisitions and rationalizations inevitably lead to some legitimate, necessary and expected reorganisation in work responsibilities. How they can best be characterised whether as a demotion as St-Hilaire would have it or as a promotion of colleagues as the employer argued is critical to the analysis;
  2. The factual frame of reference for the Court analysis is the period contemporaneous with the resignation. Post resignation facts cannot be used to colour the file. Quaere whether the more recent judgments of the Supreme Court in the Toronto (City) Board of Education, supra or in Cabiakman v. Industrial Alliance Life Insurance Co., [2004] 3 S.C.R. 195, neither of which judgment was referred to by the Court of Appeal, would allow for a more flexible application of the rule then was seen in this case;

Indeed, in that latter case, again relying on Quebec Cartier held:

"[67]...Facts subsequent to the employer's decision may be admissible in evidence, however, if they are relevant and if, they can be used to determine whether the employer's decision was justified at the time it was made."

  1. The manner in which the resignation letter is phrased and what elements are or not raised therein, is not only critical. They are make or break elements of the case;

It is, in any case, noteworthy, given the pace at which some technology giants acquire both start-ups and substantial mid-sized enterprises, that the Court of Appeal recognized that acquisition/amalgamation inevitably brings with it reorganisation as a consequence of management rights is and should not, almost by reflex trigger claims of constructive dismissal. Such an attitude is certainly to be welcomed by the business and management labour bars.

The author has been named a Fellow of The College of Labor and Employment Lawyers

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.

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