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Commercial Litigation

Disagreements over money not necessarily constructive dismissal

A recent Ontario Court of Appeal decision upheld a lower court finding that not all disagreements over remuneration — even when the boss is wrong — constitute constructive dismissal, explains Toronto commercial litigator Neil Paris.

“The court is saying that while an employer and employee may disagree about the interpretation of the employment contract, a disagreement alone will not necessarily amount to a constructive dismissal,” says Paris, principal of Paris and Company.

Constructive dismissal is where an employer, while not explicitly trying to terminate an employee, alters the working conditions to such a degree that the staff member is entitled to regard the conduct as a termination.

In Chapman v. GPM Investment Management, 2017 ONCA 227, the appellant claimed that he had been constructively dismissed because he had not been given the bonus to which he claimed he was entitled, Paris tells AdvocateDaily.com.

The man alleged that his employer omitted the sale of a certain asset when calculating his bonus, effectively reducing it by $329,000. He then left his job, believing the employer’s refusal to include the asset’s sale constituted constructive dismissal. The company argued that he resigned voluntarily.

The claimant sued for damages for breach of his employment contract and constructive dismissal.

Although the trial judge found the employer had breached the appellant’s contract by not including the profit from the sale of the asset when calculating the bonus, he did not find that the employee had been constructively dismissed.

According to the OCA decision, the trial judge determined that the breach was not “a unilateral change in the bonus structure by the employer, but a disagreement over the interpretation of the contract, and a ‘disagreement regarding the calculation of a bonus is not necessarily constructive dismissal.’”

Paris says the decision is "a reminder that even in situations where employees have a significant disagreement with their employers about the terms and conditions of their employment, they should think twice before assuming they have a claim for constructive dismissal. Not all disagreements — even those over significant sums of money — are going to constitute a repudiation of the employment contract.”

In addition to having his appeal dismissed, the man was ordered to pay costs of $17,000.

Paris says there’s a valuable lesson to be learned for both sides.

“The Court of Appeal is saying that there is room for disagreement within the employment relationship. Even when the employer is ultimately incorrect in interpreting the employment contract, a constructive dismissal claim may not be the best way to remedy the situation.”

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