Constructive Dismissal

Implied Right to Demote or Discipline

The Ontario Court of Appeal in its 1989 decision in Mifsud is well-known for offering the principle that a demoted employee may be obliged to mitigate by accepting the demoted position. This issue is reviewed subsequently. This decision had run out of popular favour by the time of its resurrection in Evans.

Apart from this unique concept, it also considered the proposition that there was an implied right of demotion, given unsatisfactory performance. The court’s view on this issue was that such a right should be available to the employer.   On this specific issue, that is, the implied right to demote for unsatisfactory performance, the court stated as follows:

The initial question is: "Was there an implied term of the employment contract that if at any time the company validly considered Mr. Mifsud's performance to be unsatisfactory it could, without his concurrence, demote him, as it did, to a position of lesser responsibility, but equal pay?" I believe that had the parties considered this question at the time of Mr. Mifsud's promotion to superintendent, they would have so agreed. Such an agreement would have protected the company's future position, and Mr. Mifsud would likely have assumed that his performance would continue to satisfy his employer as it had in the past.

This submission was raised again in the 2015 Ontario Court of Appeal. 1 In response to this argument, the Court of Appeal rejected this argument, both on the factual findings made by the trial judge that there was no performance issue shown at trial and that the two cases referenced above of Farber and Potter had stated the current status of the law:

[8]         It must be recalled that Mifsud was decided over 25 years ago. Since then the Supreme Court of Canada has addressed the issue of constructive dismissal in its decisions in Farber and Potter. In both decisions, the Supreme Court of Canada stated that a demotion is a substantial change to the essential terms of an employment contract which could warrant a finding of constructive dismissal: see, Farber, at paras. 36 and 46; Potter, at paras. 37 and 38. In any event, the trial judge’s finding that Vitran had not demonstrated that Morgan was incapable of performing his job as dock supervisor directly addressed whether Vitran could rely on any such implied term of its employment contract with Morgan to demote him.

This should put an end to such a thought.

Progressive Discipline as an Implied Term

Echlin, J. noted that the Supreme Court in McKinley spoke to the possible interpretation of an implied right to invoke lesser sanctions which may vary with the degree of misconduct. He quoted this passage: 2

[41This is not to say that there cannot be lesser sanctions for less serious types of misconduct.  For example, an employer may be justified in docking an employee’s pay for any loss incurred by a minor misuse of company property.  This is one of several disciplinary measures an employer may take in these circumstances.

A similar passage was cited in this decision from the Ontario Court of Appeal in which Doherty, J.A. spoke parenthetically to the possibility of implying into the employment relationship the right of the employer, akin to a unionized environment, of effecting graduated levels of progressive discipline. 3

Echlin. J. offered further musings on this issue. The decision noted that any such implied term for middle managers should be subject to an internal appeal process. Senior managers, he stated, should not be subjected to such an implied term. 4

These observations were very much obiter.