In Thompson v. Cardel Homes Limited Partnership, 2014 ABCA 242, the Alberta Court of Appeal Confirmed that preventing an employee from working during a purported "working notice" period can constitute constructive dismissal.

Facts

Thompson was first employed as the Regional President, Calgary with Cardel Homes Limited Partnership ("Cardel") in September 2008 pursuant to a two year written contract (the "2008 Agreement"). The parties entered into a new written agreement in September 2010 (the "2010 Agreement"). The 2010 Agreement was for a oneyear term and did not provide for a severance payment in the event of non-renewal. Cardel had absolute discretion to terminate the 2010 Agreement at any time with four weeks' written notice in which case Thompson was entitled to a 12-month severance payment for early termination.

One month before the 2010 Agreement's term expired, Thompson was advised by letter that his contract would not be renewed and that he was not required to work for the remainder of the term. The letter also advised him that he would be paid until the end of the term and instructed him to immediately return certain workplace items, including his keys.

He was further advised by Cardel's President and CEO that he (the President) would be assuming all of Thompson's duties effective immediately and that his service with Cardel would end that day. The narrow issue at trial was whether Cardel had terminated Thompson's employment or whether it had simply given him advance notice that the 2010 Agreement would not be renewed.

Cardel argued that it did not terminate Thompson's employment before the end of the fixed term. It submitted that the letter was Simply notification that his contract would not be renewed at the end of the term, and that it had relieved Thompson of his duties as a favour to him so that he could start looking for new employment.

Trial Court Decision

The trial judge found that Thompson was terminated without cause by way of constructive dismissal, entitling Thompson to the contractual severance payment of 12 months' salary.

Court of Appeal Decision

The Court of Appeal dismissed Cardel's appeal. The Court found that the letter, viewed objectively, constituted a termination on the basis that Thompson was not permitted to:

  • Continue his employment;
  • Discharge his duties or exercise his powers;
  • Come to the office.

In the Court's view, these facts Supported a finding of constructive dismissal and termination. The Court noted that the test for constructive dismissal is not merely objective. It has a subjective aspect to it, namely what a person in a position of the employee, acting reasonably, would have considered. The Court held that the immediate and substantial change to Thompson's status and employment-related powers gave rise to a reasonable inference that his employment had been terminated.

The Court went on to observe that "contracts of employment are mutual contracts. If they are to be terminated early or there is to be a unilateral change in their terms, both parties must agree, regardless of the duration of the contract." In this case, Thompson had not agreed to an early termination or to a change in the terms of his employment.

The Court noted that, typically, the damages for the early termination of a fixed term contract would be amount the employee would have earned until the end of the term. However, the parties in this matter had contracted otherwise and agreed that Thompson would be entitled to 12 months' salary. The Court held that there was no reason to depart from this agreement. Therefore, Thompson was entitled to the 12-month severance payment notwithstanding the fact that he was only dismissed one month before the end of his fixed term.

Takeaways for Employers

An intention (or not) to terminate an employee's employment is not determinative where an employer makes a unilateral, fundamental change to the terms of an employee's employment. In this case, this change was preventing Thompson from working and altering his employment status.

This case highlights the dangers of preventing an employee from working and emphasizes the importance of carefully drafting employment contracts.

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.