New Constructive Dismissal case from SCC

Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 is the most recent time the Supreme Court of Canada touched on the issue of Constructive Dismissal. There was no earth-shattering change to the law, but the case contained a few interesting edicts from the employment lawyer’s perspective. Many of these principles would apply equally to a wrongful dismissal scenario.

First, it is interesting to note that both the lower court and the unanimous New Brunswick Court of Appeal had ruled that there was no constructive dismissal. At the Appeal level, the question is usually as simple as whether the trial decision was erroneous. In order to get permission to be heard in the Supreme Court of Canada, one usually has to convince the Court that the matter has some significance to Canada as a nation. I would be curious if any readers have statistics on this, but my distinct impression is that this is a harder pitch where four judges (one of whom happens to be the Chief Justice of New Brunswick) have unanimously ruled the same way after two rounds of litigation.

The majority decision in Potter arguably introduced the term ‘substantial breach’ to characterize what was always called a ‘fundamental breach’ in prior constructive dismissal jurisprudence. The Court was clear that the underlying principles were the same, but that prior SCC cases had assigned special meaning to the term ‘fundamental breach’ in different contractual settings, which should not be confused with the employment scenario. It will be interesting to see whether this nomenclature catches on in new constructive dismissal cases.

An interesting point, though arguably obiter, is when Wagner, J. writes

“Moreover, to qualify as a breach, the change must be detrimental to the employee.”

There exists prior Canadian authority that even an apparent promotion can constitute a Constructive Dismissal and I am unclear whether this changes any of that. Further, if this is the law I would be interested to know if this is taken from a subjective viewpoint, an objective one or both. The balance of the Potter decision suggests to me that it would necessarily turn on what the employee reasonably understood at the time of the breach.

The real substance of the Potter case, however, deals with administrative suspensions. Going forward any analysis of a constructive dismissal allegation rooted in an administrative suspension will necessarily start with Potter. At paragraph 41, the Court states clearly that the employer effecting the suspension will need to establish that it was reasonably justified. Failure by the employer to discharge this onus will result in the finding that a breach has occurred. Thereafter (and as always) the employee will bear the onus of establishing that the breach was fundamental. A very telling summary of the Court’s findings is revealed by two of the headings in the later part of the majority judgment:

“(d) An Employer’s Authority to Withhold Work Is Never Unfettered”

and

“(e) An Administrative Suspension Must Be Both Reasonable and Justified”

Finally, the majority reasons state that it will almost always be true that an unauthorized administrative suspension will be a “substantial change.”

As with any Supreme Court of Canada case, only time will tell how lower Courts apply Potter, and what effect that will have on employment lawyers and their clients. The above represents my summary of the significant edicts from Potter which I and my colleagues should be alive to going forward.