All Pay and No Work? That’s Constructive Dismissal!

April 7, 2015

Last year, we discussed a case which held that preventing an employee from working during a purported “working notice” period can constitute constructive dismissal. The rationale for the decision was that unilaterally preventing an employee from performing their duties (even when they’re still receiving their pay and benefits) is a fundamental change to the terms of employment. In Thompson v Cardel Homes Limited Partnership, 2014 ABCA 242, the Alberta Court of Appeal again affirmed this principle, but in different circumstances. This case highlights the dangers of preventing an employee from working, and the importance of carefully drafting employment contracts.

Thompson was employed under a fixed term contract. One month before the expiry of the fixed term, the employer gave him a letter notifying him that it would not be entering into a new agreement with him. The letter went on to advise him that he would not be required to attend at work for the remainder of the term, but that he would continue to receive his pay and benefits. The letter also instructed him to immediately return his keys and his computer password.

Thompson brought an action against the employer alleging that he had been constructively dismissed and that, as a result, he was entitled to a 12-month contractual severance payment. The fixed term contract provided that if Thompson’s employment was terminated before the end of the fixed term, he would be entitled to receive a lump sum payment of 12 months of salary.

The employer 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 new employment.

The Court of Appeal rejected the employer’s arguments. It found that the employer had unilaterally denied Thompson the opportunity to continue performing his duties until the end of the term. The Court concluded that employer’s actions, viewed objectively, constituted constructive dismissal.

The Court of Appeal noted that typically, the damages for the early termination of a fixed term contract would be the 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 what the parties agreed. Therefore, Thompson was entitled to the 12-month severance payment notwithstanding the fact that he was only dismissed 1 month before the end of his fixed term.

Related Services

Employment & Labour

Related Articles

The Supreme Court of Canada’s Decision on Historical Child Support Awards

In the Supreme Court of Canada’s most recent family law decision, Michel v. Graydon, 2020 SCC 24, the Court settles a long-standing question about whether child support can be recalculated retroactively once a child has reached adulthood. The short answer is that child support is the right of the child and, with that fundamental tenant […]

read more

Employer’s Challenges and Obligations during the COVID-19 Outbreak

“With the combination of serious public health and economic impacts caused by COVID-19, employers are finding themselves facing unprecedented challenges”. The article Employer’s Challenges and Obligations during the COVID-19 Outbreak, written by Halifax Partner Geoff Breen & Halifax Associate Drew Ritchie, was published in the Spring 2020 edition of the Canadian Bar Association’s Nova Voce. Click here to read the full […]

read more

The Potential High Cost of a Small Claims Action

The recent decision of Justice Fred Ferguson, Mercure v Kaat Auto Sales, 2020 NBQB 39 (CanLII), (“Mercure v Kaat Auto Sales”) is another reminder to parties to think carefully before filing a Small Claims action in New Brunswick. Background In New Brunswick, a litigant can commence a Small Claim so long as the monetary amounts […]

read more
view all
Cox & Palmer publications are intended to provide information of a general nature only and not legal advice. The information presented is current to the date of publication and may be subject to change following the publication date.