Constructive Dismissal

Options Available in Response to New Term

The Ontario Court of Appeal considered the issue of the alternatives available to the employee upon being advised of new employment terms in its 1957 decision. 1 The plaintiff was a commissioned sales person and paid on a commission based on net sales. The employer advised that it would withhold 10% of the commissions, otherwise due, in a reserve fund for bad debts. Although the plaintiff did complain periodically about this term, he remained employed for over a further year following this communication. He sued, not for constructive dismissal, but for his total commissions. At trial, it was found that he had not agreed to this new term and succeeded in his claim. The Court of Appeal affirmed. Mackay J.A. set out these rules when an employer unilaterally attempts to vary the status quo agreed terms:

  1. The employee may expressly or impliedly accept the new terms, in which event, there is a new agreed contract;
  2. The employee may refuse the new term. Should the employer insist on this variation, the employee may view this conduct as termination and sue; or
  3. The employee may refuse to accept the term and remain employed. Should this situation persist, then the employee may insist upon the original terms.

These principles were accepted by the Ontario Court of Appeal in its 2008 decision. 2 In this case, the plaintiff followed the third step referenced above. The employer had given notice to amend the termination clause of his contract in September of 2002, to take effect in September of 2004. Wronko communicated his refusal to accept the amending term and remained employed. The employer did not take the position that it treated Wronko’s refusal to the new term as grounds for dismissal. For that reason, when Wronko was terminated in September of 2004, the former termination clause remained in effect.

A good illustration of a situation in which the employee was (1) offered new terms of employment, which (2) were initially refused by the employee and (3) then met by the employer’s insistence that the amended terms must be accepted or termination would follow, which in turn resulted in (4) the employee’s acceptance of the amended terms, resulting in a mutually determined new agreement was found in an Ontario decision. 3

One may add to these options the need, or not, to assert that the existing employment contract has been repudiated, that is, in the sense that the employment contract has been breached and is not to be used in the assessment of the damage claim.