In 2016, the Court of Appeal of Quebec has clarified that
reduced employer prestige cannot, in itself, serve as grounds for
constructive dismissal in the specific context of business
The Context and the Superior Court’s Ruling
In 2108805 Ontario inc. v. Boulad,2016 QCCA 75
(Boulad), the Plaintiff worked as
Director of Operations for the Montreal Airport Hotel (the
Hotel), owned by Westmont Hospitality Group
(Westmont), a prestigious company that owns or
operates nearly 600 hotels in Canada. Eventually, Westmont decided
to sell the Hotel to a small company that, according to the
Plaintiff, owns two hotels in the south of France and had no
experience in airport hotels and little prestige in the industry.
The Plaintiff alleged that, in this context, his transfer to a less
prestigious employer constituted a unilateral and substantial
change to the essential terms of his employment contract and that,
as such, he had been constructively dismissed.
Section 2097 of the Civil Code of Quebec
(CCQ) is at the heart of the
A contract of employment is not terminated by alienation of
the enterprise or any change in its legal structure by way of
amalgamation or otherwise.
The contract is binding on the successor of the
The Superior Court agreed with the Plaintiff that section 2097
CCQ cannot force him to accept a transfer to a less prestigious
successor employer. Justice Beaugé of the Superior Court
held that after a long and illustrious career in the hospitality
industry, a transfer to a less prestigious employer would be
tantamount to the Plaintiff’s “professional
suicide”. The Plaintiff’s claim for constructive
dismissal against Westmont was therefore granted.
Furthermore, the Superior Court found that the Plaintiff had no
duty to mitigate his damages by remaining employed with the
purchaser, considering the consequences to his career.
The Court of Appeal decision
The Court of Appeal overruled the Superior Court’s
decision and rejected the Plaintiff’s claim.
Firstly, Justice Marie-France Bich, writing for an unanimous
court, reiterated that section 2097 CCQ serves precisely to ensure
that employment agreements are not terminated upon the sale of a
business, and that they are transferred to the successor employer.
As such, the mere application of section 2097 CCQ cannot, on its
own, grant an employee grounds to allege constructive dismissal,
even if the purchasing entity is less prestigious.
Secondly, the Court of Appeal restated that section 2097 CCQ is
a public order provision. Although the ultimate raison
d’être of section 2097 CCQ may be to protect
employees, employees may not choose to waive section 2097 CCQ and
ask to be maintained in employment with the seller (or to be
terminated). Therefore, the Superior Court erred in law by
essentially conferring to the Plaintiff the choice of whether
section 2097 CCQ shall apply.
Thirdly, the Court of Appeal held that, had the Plaintiff been
constructively dismissed, he would have been under a duty to
mitigate his damages by remaining employed with the purchaser. In
the absence of a situation of hostility, inconvenience, or loss of
dignity, the mere loss of employer prestige, on its own, did not
justify waiving the employee’s duty to mitigate damages.
Finally, the Court adds that, although unlikely to arise
frequently considering businesses are in constant evolution,
nothing prevents parties to an employment contract to negotiate or
specifically provide for mobility or advancement opportunities as
an essential term of the contract.
The Court of Appeal’s decision provides more certainty to
employers in the context of business acquisitions. Thus, the
identity of the purchaser and the fact that it is less prestigious
than the buyer, is not a constructive dismissal.
However, the Court of Appeal’s decision is limited to the
prestige of the employing entity. As such, if the
employee’s position in the purchasing entity
is less prestigious than his position with the seller, or if the
employee’s other terms and conditions of employment are
substantially altered without his consent, a claim of constructive
dismissal may be successful.
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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