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.
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
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
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
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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