Constructive Dismissal: Chalmers v Airways Transit Service and Bladder Capital Group, 2023 ONSC 57825

Chalmers v Airways Transit Service and Bladder Capital Group, 2023 ONSC 57825

In this case, the wrongfully terminated employee worked as an executive for the company, a shuttle service company starting August 1992. In May 2018, he had been promoted several times to eventually become the company’s Vice-President. In this role, he reported directly to the company’s president and CEO of the company, and was responsible for a wide range of operational and strategic duties. He was the highest-paid employee, with a generous compensation package that included an annual salary of $116,532. 

In March 2020, the company laid off its entire workforce due to the pandemic, including the employee. While other management members were recalled in June 2020, he was never reinstated. Despite his temporary layoff, he voluntarily continued to perform work for the company without pay until June 2020, as he felt a commitment to the struggling business.

Airways Transit argued the layoff was justified under Regulation 228/20 – Infectious Diseases Emergency Leave, made under the Ontario Employment Standards Act, 2000. After he hired an employment lawyer in May 2021 to negotiate a severance package for his constructive dismissal claim, the company responded by arguing he was not constructively dismissed but rather he voluntarily resigned as a result of his attempt to negotiate his severance pay.

In turn, through his employment lawyer, he asserted he was constructively dismissed, particularly since he never resigned and it was, in fact, the company had stopped responding to his inquiries about re-employment and health benefits plans. While he initially did not oppose the temporary layoff, his perspective changed when other employees were recalled except for him. In August 2022, the company hired a new operations manager who assumed some responsibilities previously held by the wrongfully terminated employee.

Court Decision

The court referred to the legal test for proving a constructive dismissal claim in a called Potter, which established two branches to determine constructive dismissal. To succeed in a constructive dismissal claim, the employee had the burden of proving, on a balance of probabilities, that he was constructively dismissed as a result of the employer’s conduct, rather than voluntarily resigning. After the court hearing, the court found in the employee’s favour: he was constructively dismissed and was entitled to severance package.

After the court found the employee had not signed a valid or enforceable employment contract with the company allowing it to place him on a temporary layoff or terminate his employment with minimum severance package. As such, the court upheld the usual rule: in the absence of any agreement to the contrary, a unilateral layoff by an employer is considered a constructive dismissal under common law (regardless of any temporary changes under the Ontario Employment Standards Act, 2000).

In determining how much pay in lieu of notice (severance package) the employee was entitled to receive from the employer as a result of his constructive dismissal, the court consider the fact that it took him 23 months to find a new job, eventually landing a position paying him a base salary of $85,000 — considerably less than his position at the company.

In his constructive dismissal claim, the employee sought 24-months’ notice, along with an additional 1 month “bump” in his notice period because of the negative impact of COVID-19 pandemic on his ability to find a new job. In response, the employer argued that a range of 16 to 22 months was more reasonable. However, the court ultimately awarded the constructively dismissed employee a severance package of 25 months’ notice, as the employee requested.

Additional Financial Compensation to the Employee for the Employers’ Unfair Conduct

In addition to a severance package for constructive dismissal arising from his unlawful temporary layoff, he sought an award of combined aggravated, moral and/or punitive damages in the amount of $200,000.

Aggravated/moral damages for Bad Faith

In seeking damages for the employer’s conduct, the employee argued:

• he was laid off during the pandemic
• employer failed to recall him back to work from his temporary layoff while recalling other employees
• he though he offered to return at 80% of his salary, the company rejected him
• the company failed to update him about his employment status, or respond to his requests to return to work
• the company did not pay his accrued statutory vacation or make annual contributions to his RRSP. The behaviour of his employer was characterized as “malicious, oppressive and high-handed” and led to severe anxiety and stress over his financial future.

While finding that the employer’s conduct was “untruthful, misleading or unduly insensitive,” the court ruled there was not enough evidence that he suffered mental anguish over and above the ordinary distress and hurt feelings that result from a dismissal. As such, it refused to award aggravated/moral damages.

Punitive damages

However, based on the same facts, the court chose to award the constructively dismissed employee with $30,000 in punitive damages, holding:

“I find that Airways Transit did not satisfy its duty of good faith in its dealing with (MC) and recalling him to work. (DB’s) evidence was that he intended to return (MC) to work at the end of the COVID-19 Period,” it said. “I find (DB’s) statement in this regard to be a feeble attempt to justify the inexcusable failure to recall (MC) in a timely manner or, in the alternative, to lawfully terminate his employment. Airways Transit knew or ought to have known that stringing Mr. Chalmers along to believe that it could potentially recall him at some unknown point in the future, when things had sufficiently improved for the company, was placing him in an impossible situation. He would have to sit and wait quietly “in the wings”, with no pay or benefits, for an indeterminate duration and rely on the limited communication or feedback offered by Airways Transit. This is completely unreasonable and unacceptable behaviour on the part of an employer.

In addition, the court concluded:

In my view, by the manner in which it treated Mr. Chalmers, Airways Transit engaged in sufficiently harsh and outrageous conduct that it merits a punitive damages award, including the following grounds:

(a)     When initially laid off, Mr. Chalmers was asked to work without pay.

(b)     In or about June 2020, Airways Transit had recalled several senior managers but not Mr. Chalmers.

(c)     Airways Transit contacted Mr. Chalmers in the months subsequent to his layoff to ask questions regarding operations, procedures, contacts and staffing matters. He was also asked to provide passwords. I find that this conduct was an obvious attempt by Airways Transit to phase Mr. Chalmers out of his role as Vice-President.

(d)     Mr. Chalmers followed up with Airways Transit multiple times about returning to work and Airways Transit failed to respond to his inquiries.

(e)     Airways Transit refused to pay Mr. Chalmers his outstanding vacation pay in contravention of the ESA.

(f)      Airways Transit failed to make contribution to Mr. Chalmers’ RRSP plan.

(g)     As of the motion hearing date, Airways Transit had not paid Mr. Chalmers his statutory entitlements pursuant to the ESA.

(h)     Despite attempts by Mr. Chalmers to return Airways Transit’s property, Airways Transit pled that he had failed to return said property and threatened “recovery” of damages for same.

(i)      Airways Transit’s conduct, including its silence and failure to provide relevant information in a timely manner, severely harmed Mr. Chalmers’ ability to make informed decisions concerning his employment and career.

(j)      By its actions, Airways Transit also failed to assist Mr. Chalmers with a new job search or to give him a letter of reference.

[160]           Employees depend on employment not only for their financial survival but also for a sense of self-worth. Conduct of the employer that negatively impacts on those two essential elements warrants condemnation and punishment.

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