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Muntean v. Enablence: Wrongful Dismissal Damages Without a Termination?

Sean Bawden over at Labour Pains blog let time know about a very odd little wrongful dismissal decision issued recently in Ontario.  The case is called Muntean v. Enablence Canada.   Give it a read and see if you can figure out what the hell happened in it.

Basic Facts

Muntean (M) had a 3 year fixed term contract that included a term requiring 6 month’s notice of termination if the employer decided to

Here's a Head-Scratcher for You

Here’s a Head-Scratcher for You

terminate the contract early, and 3 months notice by M to terminate early.  It did not permit a layoff during that 3 year period, and did not include a term requiring the employee to mitigate in the event of an early termination.  Apparently M had worked for EC for 6.5 years, so I assume there had been an earlier fixed term contract?  Not clear.

On November 25, 2014, the employer informed M that he was being temporarily laid-off due to the employer’s financial problems.  The employer said it would continue benefits and might recall the employee later.   On December 15, the employer called to invite M back to work.  However, M instead decided to treat the temporary layoff as a constructive dismissal and his lawyer sent a letter to the employer indicating this on December 16.  M accepted a new job elsewhere on February 4, 2015 at a higher rate of pay than he had been receiving at Enablence.

How I would have expected to judge to deal with the case

Those facts are simple enough.  The straightforward first issue is whether M was constructively dismissed when he was temporarily laid off on November 25.  There are loads of decisions finding that absent a provision in the contract permitting layoffs, an employee can treat a temporary layoff as a constructive dismissal.   See for example Davies v. Fraser Collection Services,  Collins v. Patterson Industries, or McLean v. The Raywal Limited, among other cases (and see p. 195 of Law of Work).  That appears to be what happened here.

Therefore, the easy answer to this case would have been for the judge to find that the layoff on November 25 amounted to a fundamental breach of contract that was accepted by the employee a few weeks into the layoff, and so a constructive dismissal occurred entitling M to damages.

The calculation of this damages raises another set of issues.  The notice period required in the contract was 6 months.  However,  if M was required to mitigate his damages, then his refusal of the employer’s offer to reemploy him made on December 15 may have constituted a failure to mitigate, applying the SCC’s ruling in Evans v. Teamsters Local 31.  In Chevalier v. Active Tire and Auto Centre, the Ontario Court of Appeal dealt with a  similar scenario and ruled that an employee who was constructively dismissed by a temporary layoff had failed to mitigate when he declined an offer from the employer to return to work during the notice period.

However, apparently the contract in this case required 6 month’s notice to M in the case of an early termination and did not require mitigation. Therefore, as M’s lawyer argues, this may fit within the rule in Bowes v. Goss Power Products, where the Court of Appeal ruled that there is not duty to mitigate in the case of an expressed notice of termination clause.  If Bowes applies, then M was not required to accept the recall offer and even the earnings from M’s new job starting in February 2015 would not be offset from damages owed by Enablence.

How the Judge Actually Dealt with the Case

However, the judge does not deal with these mitigation issues at all.  Let’s try to follow along what Justice Ray decided.  Firstly, he accepts that an employee can treat a temporary layoff as a constructive dismissal, but then concludes that didn’t happen here because “the terms of the layoff anticipated the continuance of the employment relationship” by allowing the employee to claim benefits during the layoff period.  Huh?

The employer was contractually required to continue the benefit package whether M accepted the repudiation of contract or not. Cancelling the benefits was not an option available to the employer.  The contract required 6 month’s notice of termination during which wages and benefits must continue.  Therefore, a temporary layoff that would be a constructive dismissal does not cease to be so simply because the employer points out that it will continue to comply with its contractual obligation to provide benefits during the notice period.  The continuation of benefits is irrelevant to the issues involved.

The key finding appears to be that M did not accept the constructive dismissal fast enough.  Three weeks was too long for the employee to seeks legal advice and decide whether to quit.  The judge appears to conclude that once M was offered a recall his opportunity to accept the layoff as a constructive dismissal was over.  This reasoning effectively allowed the employer to turn an unlawful temporary layoff into a lawful one by offering recall before the employee makes the decision to treat it as a constructive dismissal.  The judge wrote:

It is clear on the evidence that the plaintiff did not decide what he wanted to do until after he was aware the defendant wanted him to return to work. By that time, it was too late for him to declare that he had been constructively dismissed. In addition, his continued application for a receipt of benefits from the defendant’s employment is troubling and is inconsistent with his declaration of constructive dismissal.

Again, I don’t understand why M’s benefits claims are relevant to anything.  On M’s theory of the case he had been terminated, and was entitled to 6 months more benefits coverage, so making claims is consistent with his having been constructively dismissed.

However, the confusion does not end there.  To this point in the decision, it looks like the employer has won.  Since there was no constructive dismissal, there was no termination.  But then the surprise comes.  Apparently the employer still committed a wrongful dismissal!

In one of the more peculiar bits of legal gymnastics I’ve seen in a while, the court rules that M was wrongfully dismissed, and then the judge disregards the notice of termination clause in the contract requiring 6 months notice, and finds that the employer was required to provide “reasonable notice” based on 6.5 years of service as an engineer, which the court fixes at an amount equivalent to about 10 weeks (calculated from the date of layoff to the date M gets a new job on Feb. 4 2015).

Even if accept that there was a termination that was not a constructive dismissal (?), and the very confusing conclusion that the contract required implied “reasonable notice” and not the 6 months notice actually stated in the contract, surely 10 weeks notice for a 6.5 year engineer is way below the usual range for reasonable notice.

Concluding Thoughts

My guess is that if this case were appealed, it would almost certainly be overruled.  Regardless of which party ultimately ‘wins’ the case, there needs to be coherence in the reasoning.

Can you find any logic in this decision?

Cross-Reference to Law of Work book:

Chapter 13 on Termination with Reasonable Notice explores how judges decide on the length of reasonable notice.

Chapter 15 on Constructive Dismissal discussed how a temporary layoff is grounds for constructive dismissal unless the contract includes a term permitting the layoff.  It also explores how long an employee has to ‘accept’ the repudiation of the contract.

Chapter 16 on Damages in Wrongful Dismissal Lawsuits discussed Bowes v. Goss Power and the question of mitigation when there is an expressed notice of termination clause.



One Response to Muntean v. Enablence: Wrongful Dismissal Damages Without a Termination?

  1. Andres Reply

    April 7, 2016 at 5:23 pm

    You sometimes see wonky employment law decisions like this out of small claims but this is pretty unusual for a superior court.

    It seems what was really botched was the law around condonation. An employee can be deemed to have condoned a material breach if they continue on without protest, but how can the employer’s own actions be relevant to condonation? The breach crystallizes when it occurs – that is the date of the constructive dismissal. The employer can’t close the window on the employee’s rights to claim the constructive dismissal. I agree that offering reemployment may be relevant to mitigation, but it can’t put the toothpaste back in the tube and unbreach.

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