Canada: Agree To Disagree: No Constructive Dismissal Where Employer Wrongfully Withholds $329,687 From Employee

Last Updated: April 25 2017
Article by James Green

The Ontario Court of Appeal has offered employers some solace in handling disputes with employees over the proper interpretation of the employment contract. In the recent decision of Chapman v. GPM Investment Management, 2017 ONCA 227, the Court of Appeal upheld the lower court's decision which had found that no constructive dismissal occurred when the employer withheld a substantial bonus payment to the employee based on the employer's erroneous interpretation of the employment contract.


Chapman was employed as the President and CEO with GPM Investment Management and Integrated Asset Management Corp. (the "Employer"), a real estate management company. Over the course of his employment, Chapman had signed several memoranda of understanding which set out the terms of his employment. The latest of these, signed in November of 2008, provided Chapman with an annual bonus entitlement to be calculated as "10% of pretax profit" of both the Employer and a related company, less interest income and depreciation (the "Bonus").

While the Employer's ordinary business was the generation of fees from its real estate management services, it was also the largest shareholder of a real estate investment company whose only asset was land located in Edmonton, Alberta. In May of 2011, this real estate investment company sold its interest in the land and paid a significant dividend to the Employer (the "Real Estate Profits").

When the time came to calculate Chapman's Bonus, the Employer did not include the Real Estate Profits in the calculation, taking the position that only those profits made in the ordinary course of the Employer's business ought to be considered. Excluding the Real Estate Profits from the calculation had the effect of reducing Chapman's Bonus by $329,687.

In response, Chapman resigned and brought an action for both the unpaid Bonus amount and damages for constructive dismissal.

Chapman was successful at the Ontario Superior Court of Justice in his argument that the Employer had mis-interpreted the Bonus provision of his employment contract, and was awarded the $329,687 which should have been paid to him. However, he was unsuccessful in his claim of constructive dismissal, and appealed this finding.

Decision on Appeal

The Ontario Court of Appeal determined that, to be successful in his claim of constructive dismissal, Chapman had to show that:

  1. the Employer's refusal to include the Real Estate Profits in his Bonus calculation breached an essential term of Chapman's employment contract; and
  2. that a reasonable person, in the same circumstances as Chapman, would have concluded that the Employer's conduct evinced an intention to no longer be bound by the employment contract.

There was no question that Chapman had met the first step, as the Employer did not contest on appeal that it had in fact breached Chapman's contract of employment by failing to include the Real Estate Profits in the calculation of his Bonus.

On the second step, however, the Court held that the withholding of the $329,687 rightfully due to Chapman was not in and of itself sufficient to meet the constructive dismissal threshold. Central to this conclusion was the fact that the Employer had no other real estate investments at any time during Chapman's employment and, as a result, had not realized profits from any of those investments. The Real Estate Profits were therefore a highly unusual occurrence which gave rise to a bona fide dispute as to the proper interpretation of the Bonus provisions in Chapman's employment contract.

Given these unique facts, the Court found that a reasonable person in Chapman's shoes would not have concluded that the Employer's decision to withhold the additional Bonus amounts represented a substantial alteration of an essential term of the employment contract. Rather, this was simply a genuine dispute between the Employer and Chapman as to the proper interpretation, and thus calculation, of Chapman's Bonus.

What This Means for Employers

This decision is good news for employers who find themselves in disputes with their employees as to the proper interpretation of the employment contract. The Court reiterated that there is a fine distinction between the unilateral alteration of an essential term of the employment contract, on the one hand, and a bona fide disagreement as to its interpretation on the other.

In addition, where such a bona fide disagreement arises, the Court's decision suggests that an employer may proceed to enforce its own interpretation of the employment contract without necessarily being liable for constructive dismissal, even if the employer's interpretation is ultimately determined to be incorrect. This conclusion, however, will likely depend heavily on the unique facts of each case.

A cautionary note, however, in dealing with employees who commence legal action to enforce their own interpretation of the employment contract. Given the Court's finding that such interpretive disputes do not necessarily suggest an intention to no longer be bound by the employment contract, employees may be permitted to bring such actions while remaining employed. It would be wise to seek legal counsel before taking disciplinary steps against such an employee.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

James Green
Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions