Does an Employee Automatically Resign if They File a Constructive Dismissal Action?

May 7, 2015

What happens when an employee files a constructive dismissal action against their employer, but keeps coming to work? Can the employer take the position that the employee has resigned, or must the employer allow the employee to keep working indefinitely?  This issue was recently considered by the Nova Scotia Supreme Court in Garner v Bank of Nova Scotia, 2015 NSSC 122.

In that case, Garner was employed by the Bank of Nova Scotia (the “Bank”) for 35 years, most recently as Branch Manager. His performance evaluations were excellent, and the branch that he managed exceeded its financial targets ten out of eleven years.  Garner expressed an interest in moving to a more senior position and applied for several positions. He was not selected for any of the positions.

In April, 2011, he filed a complaint of age discrimination against the Bank with the Canadian Human Rights Commission alleging that he was not selected for a more senior position due to his age. The parties unsuccessfully attempted to mediate the human rights complaint, and Garner subsequently withdrew his complaint. In August, 2011, Garner filed an action against the Bank in the Nova Scotia Supreme Court alleging discrimination, constructive dismissal and tortious interference with contractual relations.

After receiving the Statement of Claim, the Bank offered to continue the employment relationship if Garner withdrew his action. The Bank took the position that Garner’s allegations in the action were inconsistent with his continued employment, and that the commencement of the action was a repudiation of his employment. Garner refused to withdraw the action, and the Bank indicated in response that Garner was not to report to work after September 8, 2011. On September 12, 2011, Garner amended his pleadings to claim wrongful dismissal, retaliation, defamation and tortious infliction of nervous shock.

Following fifteen days of trial over the course of three months, the Court concluded that Garner was not constructively dismissed, but that he was wrongfully dismissed by the Bank.

With respect to the claim for constructive dismissal, Garner alleged that he was constructively dismissed as a result of discrimination and breaches of the Bank’s duty of good faith and fair dealing. The Court concluded that age was not a factor in the decisions not to promote Garner and that he was not discriminated against on the basis of age. The Court declined to rule on whether employers have a general duty to treat their employees fairly and in good faith in all aspects of their employment relationship because it concluded that even if Garner could establish that such a duty exists, nothing that the Bank did would constitute a breach of such a duty.

With respect to the wrongful dismissal claim, the Bank alleged that it did not terminate Garner’s employment, but rather that Garner repudiated the employment contract by bringing an action for constructive dismissal.

The Court rejected the authorities relied on by the Bank in support of its position. The Court concluded that, rather than an automatic finding of repudiation (and deemed resignation), a contextual analysis should be applied to determine whether the commencement of a constructive dismissal action gave rise to a breakdown in the employment relationship. The Court stated that in some circumstances, it will be clear that the filing of an action against an employer will constitute a repudiation of the employment contract. In other circumstances, however, the commencement of the action may not render the continuation of the employment relationship untenable and the employee will not be deemed at law to have resigned. Each case will have to be decided on its own facts.

The Court provided the following framework for the determination of whether an employee repudiated the employment contract by filing an action for constructive dismissal:

In analyzing the situation, the court will first ask whether the employee actually resigned. If the answer to that question is negative, the court should go on to ask whether, in the circumstances of the case, the employee’s actions were such that he should be found to have resigned by operation of law or to have repudiated the employment contract by filing an action against his employer. In assessing this issue, the court should consider, inter alia, the nature of the plaintiff’s employment, the length of his service, the context in which the action was brought, the nature and seriousness of the allegations made against the employer and the extent to which the lawsuit impacts upon the employment relationship. In essence, was it reasonable to expect the employee and employer to continue the relationship? Put another way, has the filing of the action given rise to a breakdown in the employment relationship to the extent that continued employment has become untenable? (para 195)
The Court concluded that Garner did not resign and that, in fact, he wanted to continue working for the Bank. Further, the Court was not satisfied that Garner repudiated the employment contract by commencing the action, or that the action made his continued employment untenable. Therefore, the Court concluded that the Bank wrongfully dismissed Garner when it terminated his employment without reasonable notice.

The Court concluded that Garner was entitled to damages equivalent to twenty-four months of notice, based on his age, years of service, position and difficulty in securing alternate employment.

In summary, the answer to the question of whether an employee resigns if they file a constructive dismissal action is “it depends”. Like so many issues in employment law, this issue is contextual and requires a consideration of all the facts. Unfortunately for employers, this means that unless an employee clearly and unequivocally shows an intention to resign, there will be at least some uncertainty regarding the effect of the commencement of a constructive dismissal action on the status of the employment relationship.

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