Under Ontario’s employment law, an employee’s job may be terminated “unofficially” or as many employment lawyers call it, a “constructive dismissal.”
There can be many forms of a constructive dismissal (as discussed below). However, in this article, we will discuss one form that unfortunately employment lawyers encounter more often: workplace harassment.
Back not very long ago, many employees could lodge legitimate claims against their employers for constructive dismissal, often resulting in a mutual parting of ways and a financial severance package for the employee.
Then, in 2018, the Ontario government introduced legislation to the Workplace Safety and Insurance Act, 1997, which (to some observers) appeared to prohibit employees from suing their employers for psychological injuries suffered at work due to bullying or harassment (i.e., work-related chronic mental stress).
From there, it did not take long for the WSIAT (the WSIB benefits tribunal) to flex its new muscles in a case called Morningstar v Hospitality Fallsview Holdings Inc. (“Morningstar“). In that case, the WSIAT made a controversial ruling that employees have no right to sue their employer for constructive dismissal related to workplace harassment.
So, for a while, it appeared that employment lawyers would be hard-pressed in helping employees mount constructive dismissal claims based on workplace harassment and toxic work environments. In other words, that such claims had gone the way of the Dodo.
Fortunately, it now seems it may not have taken long for common sense to prevail. With the recent decision of the Ontario Divisional Court, what’s old is new again. As discussed below, following a judicial review of the Morningstar case that was long overdue, the courts have that now weighed in and, alas, have determined employees can, in fact, sue their employers for constructive dismissal based on workplace harassment.
But before delving into this important (and welcome) development in employment law, it may be helpful to review a few key issues:
- What is a constructive dismissal?
- What is the WSIB regime?
- What happened in the Morningstar?
What is the Ontario WSIB System
The WSIB system governs the compensation Ontario workers are entitled to receive when are injured in the course of their employment. These are typically referred to as “WSIB benefits.”
Here’s how it works: the WSIB insurance system sets out a “no-fault benefits” option, meaning if an employee is injured at work, they do not have to prove who caused the injury. In other words, employers are generally held liable for workplace injuries, as long as the employee can prove the injury or disease is work-related.
However, the employee does not have to prove the injury was the employer’s fault. the employee to receive WSIB benefits when they are forced out of work without income. In exchange, employees cannot sue their employer for the work-related injuries
This is considered the “historic trade-off”: WSIB law prohibits employees from suing their employers for work-related (workplace) injuries (such lawsuits are called “tort claims”).
What is a Constructive Dismissal?
Under Ontario employment law, a constructive dismissal occurs when an employer implements a significant, unilateral change to the terms and conditions of an employee’s job, which is not accepted by the employee. This can include many different types of changes, such as:
- – demotion
- – major salary reduction
- – unauthorized layoff
- – failure to pay wages
- – unauthorized and unpaid leave of absence
- – major work relocation
- – workplace harassment
The burden of proving a constructive dismissal rests on the employee. If a court agrees that a constructive dismissal occurred, the employee is usually entitled to receive a financial severance package (see here for explanation). If an employee resigns from their job and is unable to prove a constructive dismissal, a court would typically conclude the employer voluntarily resigned and is not entitled to a severance package.
What Happened in the Morningstar case?
In the Morningstar case, the employee worked as a hotel cleaner for a hotel. As a result of various health issues, she emitted an unusual body odour. Unfortunately, she was was relentlessly teased and harassed by her co-workers, and despite complaining to her managers, nothing was done to help to stop the workplace harassment. As is typical, she did her best to deal with the workplace issues. However, her doctor eventually recommended she avoid going back to work because of serious mental health issues she suffered because of workplace harassment, including stress, anxiety and depression.
Soon after, the employee sued her employer for constructive dismissal. Specifically, she argued that her employer’s failure to stop the workplace harassment created an unsafe working environment.
In its defence, the employer took its case to the WSIAT under a section 31 application. There, it argued that Ontario WSIB law prohibits the employee from suing the company for constructive dismissal, since her claim was based on “chronic mental stress” resulting from workplace harassment issues. As such, it sought a declaration that she was only permitted to bring a worker’s compensation claim for WSIB benefits, not due to the employer in court. The WSIAT agreed.
From the perspective of an employment lawyer, this decision was wrong for many reasons. For instance, it wrongly characterized constructive dismissal claims (which are based on contract law) resulting from workplace harassment as a tort claim (based on tort law), just like any other personal injury.
Put simply, personal injury lawsuits are “tort” claims, where the person seeks damages as compensation personal harm. On the other hand, a constructive dismissal lawsuit is a breach of contract claim, where the employee seeks damages to compensate for the employer’s failure to honour their obligations under the employment contract (i.e., subjecting the employee to workplace harassment, which is certainly a working condition any employee would sign up for or tolerate).
Not surprisingly, on appeal in judicial review, the court ultimately overturned the WSIA Tribunal’s decision. Mist importantly, the court found that employees are allowed to sue their employers for constructive dismissal based on workplace harassment.
This is a huge win for employees. Quite often, as an employment lawyer, employees ask for help in dealing with work-related stress, anxiety and depression due to workplace harassment by colleagues or managers. An important remedy in those cases is pursing a constructive dismissal claim (although they are generally risky and difficult to prove).
The main problem with the WSIA Tribunal’s decision is that allowed employers to avoid responsibility for health issues their employees suffer as a result workplace harassment it is legally required to prevent (e.g., bullying). In other words, it offered employers a free pass from their legal obligation to protect employees from workplace harassment, and from being held to account when it occurs.
Post-Morningstar: Where do We Go From Here?
As a result of the WSIAT decision, many employers sued by employees for constructive dismissal claim resulting from workplace harassment strategically sought to dismiss those claims by arguing they fell within the jurisdiction of workers compensation law (WSIB), rather than lawsuits in courts. Why?
Because by limiting the employee’s remedies to only the benefits WSIB benefits, many employers were able to avoid exposure to significant damages for pay in lieu of reasonable notice, punitive damages, damages for bad faith manner of dismissal, and intentional infliction of mental suffering.
As the Court itself noted in Morningstar, this often unfairly deprived employees with legitimate claims for constructive dismissal resulting from workplace harassment and bullying of a valuable tool to hold employers accountable:
“Without being able to resort to the remedies offered by claims for constructive dismissal, workers in the applicant’s position face an unpalatable sort of “prisoner’s dilemma”: either to return to a poisoned work environment or to leave their employment without the damages in lieu of the notice to which they would otherwise be entitled.”
Moving forward, unless the Morningstar court decision is overturned by the Ontario Court of Appeal, employees are permitted to bring a civil claim for constructive dismissal against their employer for workplace harassment, as well as aggravated/moral and punitive damages stemming, such as when they are bullied by coworkers and/or managers in the workplace.
Call Today for Employment Lawyer Help
Whether you are are an employer or employee, please contact Bune Law at 647-822-5492 arrange a consultation with an employment lawyer in the Toronto area.
If you are an employee suffering workplace harassment, or wishing to discuss a potential constructive dismissal claim, call Bune Law for help. When you call, you will speak with an experienced employment lawyer assisting with severance package review and negotiation. Call today to learn about your legal rights.
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