TERMINATION OF EMPLOYMENT CONTRACTS

INDEX

I. INTRODUCTION.

II. TERMINATION OF EMPLOYMENT CONTRACTSGENERALLY .

A. EXPRESS CONTRACTUAL TERMS .B. IMPLIED TERMS .C. FRUSTRATION .

III. EXPRESS CONTRACTUAL TERMS

IV. IMPLIED CONTRACTUAL TERMS- EXPRESS DISMISSAL BY EMPLOYER

V. IMPLIED CONTRACTUAL TERMS- RESIGNATION BY EMPLOYEE

VI. CONSTRUCTIVE DISMISSAL ..

A. INTRODUCTION . . . . . . . .B. WHAT IS CONSTRUCTIVE DISMISSAL? . .C. SOME PRINCIPLES TO KEEP IN MIND .D. EXAMPLES .

1. Generally .2. Demand for Resignation .3. Change in Remuneration/Benefits.4. Demotion/New Job Responsibilitites5. Transfers. . . . . .6. Multiple Changes .

E. MITIGATION

VII. FRUSTRATION

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TERMINATION OF EMPLOYMENT CONTRACTS

I. INTRODUCTION

This paper focuses on the "termination" aspect of the

employment relationship, and in particular the concept of

constructive dismissal.

How does the employer or employee go about terminating

the employment contract? This, will depend on the express or

implied terms of the employment contract. As a result, in any

given fact situation, an employer or employee might be found to be

in breach of the employment contract by virtue of the manner in

which the termination occurs.

This paper presents a framework for your consideration.

While all circumstances certainly do not fit neatly into this

framework, it should be a useful guide in dealing with termination

questions. The paper is not intended to be an abridgement, but

rather a discussion covering basic termination concepts with

emphasis on Saskatchewan case law.

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II. TERMINATION OF EMPLOYMENT CONTRACTS GENERALLY

Ordinarily, an employment contract will be terminated in

accordance with express contractual terms or implied contractual

terms. On occasion, as well, an employment contract might be

terminated through frustration of the same. These situations might

be summarized as follows:

A. EXPRESS CONTRACTUAL TERMS

Express contractual terms can be written or verbal.

Those express terms can specify when the contract might be

terminated and the consequences of such termination. Generally on

the point of termination, express contractual terms will provide

that a contract may be terminated:

1. at a specified time;

2. on the occurrence of a specified event, or

3. on the provision of a specified notice by either party,

or specified pay in lieu of notice by the employer.

Termination by the employee or the employer in breach of the

express terms may result in damage claims. Termination itself can

be express or constructive.

B. IMPLIED TERMS

Where there is no express term in the contract, the law

will imply terms. In this context, the termination can occur in

the following ways:

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1. Resignation by the employee, with or without just cause

and with or without reasonable notice.

2. Dismissal by the employer wi th or without just cause, and

wi th or without reasonable notice. Dismissal by the

employer can be:

a) Express, either written or verbal; or

b) Constructive.

C. FRUSTRATION

As with any other contract, an employment contract can

be frustrated through events not caused by the party claiming

frustration.

III. EXPRESS CONTRACTUAL TERMS

When an employer or employee seeks your advice with

respect to a termination the first question you should ask yourself

is: What does the contract say about termination? In answering

this question, you will canvass with your client all aspects of the

employment relationship to see if the parties addressed themselves

to the issue. If there is an express contractual term covering

termination of the contract, that contractual term will govern.

The express term can, as indicated earlier, either be

written or verbal. It might specify when the contract can be

terminated and also the consequences of such termination. Express

contractual terms can provide that the contract will be terminated:

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l. at a specified time;

2. on the occurrence of a specified event; or

3. on the provision of a specified notice by either party,

or specified pay in lieu of notice by the employer.

While it is intended that the differences between a fixed

term contract and an indefinite contract be dealt with in another

paper, some general comments here will be useful for completeness.

In the case of termination at a specified time and the case of

termination on occurrence of a specified event, if the contract is

not terminated in accordance with its terms, one of the parties

will be in breach.

In the third type of provision, that specifying the

notice required by either party, or specifying the pay in lieu of

notice by the employer, the contractual term will govern even if

the notice provided in the contract is less than what might be

awarded at common law in the absence of such a provision. A recent

Saskatchewan case illustrates this point. In Snead v. Agricultural

Development Corporation of Saskatchewan (1990), 85 Sask .R. 13

(Q. B., per Grotsky, J.), the plainti ff was claiming one year's

salary in lieu of notice in a situation where his employment

contract with the defendant contained a clause which read:

"Dismissal without cause: In the event ofdismissal without valid cause Paul Snead willreceive in the first year of service withAgdevco four months' salary as severance, andthereafter an additional month's salary foreach year of service, provided that such

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severance pay shall in no event exceed 12months' salary."

In those circumstances, the trial judge made the following finding

at p.26-27:

"In my view, where the contract of employmentprovides the formula by which severance is tobe calculated, that formula, absentconsiderations which make it inapplicable,ought to govern the parties' contractual rightsand obligations thereunder. Here, in my view,there are no considerations which make theagreed upon formula inapplicable.

"In Wallace v. Toronto-Dominion Bank (1983),41 O.R. (2d) 161, the Ontario Court of Appealreferred with approval at p.18! to thefollowing passage from its earlier unreportedjudgment in Jobber v. Addressograph Multigraphof Canada Limited delivered December 17, 1980,(summarized 6 A.C.W.S. (2d) 332) whereinMacKinnon, A. C. J .0., speaking for the courtsaid:

'The parties at the time of enteringinto the contract had clearlycontemplated the length of noticethat would be required if either ofthem wished to terminate therelationship without cause.

'There is no suggestion that theparties were not at arms' length atthe time of entering into theagreement, nor is there anysuggestion that there was anycoercion or improper influence ofany kind forcing the respondent toaccept this term. In our view, theclause is clear and unambiguous andstates the measurement of therequired length of notice whetherei ther party decided to terminatethe employment without cause. Thefact that no notice was given doesnot thereby eliminate the provisionsof the termination clause from

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consideration. This was, in effect,the estimate of the damage thatwould flow from the termination ofthe contract without cause which theparties had in actual contemplationat the time of entering theagreement. This approach issanctioned by Adqis v. GramaphoneCo. Ltd. [1909] A.C. 488, and thecases following it.'

"In the present case, the parties clearlyaddressed and agreed upon the formula to beemployed in determining the amount of severancepay to be paid by Agdevco in the event ofSnead's dismissal without valid cause. Theparties are bound by their contract. No termought to be implied in a contract which iscontrary to the clearly expressed intention(and agreement) of the parties. See: Chittyon Contracts (25th ed. 1983), at p.460 andLondon Export Corporation' Ltd. v. JubileeCoffee Roasting Co. Ltd. [1958] 2 All E.R.411, at pp.417-418, per Jenkins, L.J."

The result is that unless something has occurred which

would allow a court to conclude the parties had agreed to alter the

contract, the express term will govern.

Any discussion of express contractual terms with respect

to termination would be incomplete without a comment on employment

policies. Insofar as termination is concerned, an employer's

"policy" with respect to what occurs on termination of employment

can be part of the employment contract if the proper circumstances

exist. If you encounter this question, a good starting point is

Cranch and Schostal v. Canada Permanent Trust Company, [1985] 1

W.W.R. 725 (Sask.Q.B.), rev'd [1986] 3 W.W.R. 479 (C.A.). See also

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) Ewasiuk v. Estevan Home Care Inc. (1985), 42 Sask.R. 38 (Q.B., per

Geatros, J.).

IV. IMPLIED CONTRACTUAL TERMS - EXPRESS DISMISSAL BY EMPLOYER

In the absence of an express contractual term, the court

will imply terms into the employment contract, including terms with

respect to termination. For a good discussion of implied terms in

the context of employment contracts, see Page v. Jim Pattison

Industries Limited (1984),33 Sask.R. 253 (C.A.). As stated by the

Ontario Court of Appeal in Mifsud v. MacMillan Bathurst Inc.

( 19 89 ), 6 3 D. L . R. (4 th ) 7 14 at 719 :

"It must be remembered that the relationshipbetween the parties is contractual. Wherethere is no written contract it is firstnecessary to determine what terms are impliedin the specific contract involved, and thoseterms are not those which the court considersreasonable, but rather what the parties wouldhave agreed to when forming the contract, hadthey turned their minds to the type ofsituation which later transpired. "

In the context of termination by the employer, Mifsud goes on to

say at p.722:

"When an employer wishes to dismiss an employee(other than for cause) the employer may chooseeither to give the employee reasonable noticeof his termination date and require that hework out the notice period, or he may requirethe employee to leave immediately, thusrendering the employer liable for damages equalto the employee's remuneration and benefi ts forthe reasonable notice period.... "

The act of termination by the employer, then, can be

j express or constructive. For termination to be express no magic

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words are needed. It can be communicated in writing or verbally,

but however communicated the intent to dismiss must be clear. As

soon as the intent to terminate is communicated, the termination

will be effective. (See, for example, Boddington v. Vaughan

Electronics Ltd. (1987), 16 C.C.E.L. 201 (N.B.Q.B.) affirmed

(1988), 88 N.B.R. (2d) 1 C.A.)).

We must also remember that the consequences of the

termination depend upon whether or not there is cause for that

termination, and if there is no cause whether reasonable notice has

been provided by the employer or the employee.

V. IMPLIED CONTRACTUAL TERMS - RESIGNATION BY EMPLOYEE

In theory, the concept of reasonable notice of

resignation by an employee is merely the converse of the concept

of reasonable notice by the employer. In practice, however, one

will find that in most indefinite hiring situations, an employee

has been told, at least verbally, that a certain amount of notice

of resignation will be required. In practice, as many

practitioners will be aware, this will usually be one week, two

weeks or one month because employers and employees tend to equate

employee notice with the length of the pay period.

There is a developing body of caselaw, however, on

"wrongful resignation" in situations where the parties never agreed

on what the notice should be. A full discussion of the principles

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applicable to this area is beyond the scope of this paper, but it

is at least useful here to note the components of the action as

outlined by Levitt at page 267:

"The following are the components of an actionfor wrongful resignation:

(1) the employee has resigned voluntarily;(2) no cause exists for the resignation.Causes for resignation are those mattersdetailed under constructive dismissal such asdecrease in remuneration, emotion, etc.;(3)the employee failed to provide the employerwith reasonable notice of resignation;(4)the employer suffered damages as a result.

"The employer can only claim damages and isunable to obtain a court order to compel theemployee to return to work. However, thecourts will award only those damages which thecompany can establish it actually incurred asa result of the employee's failure to provideadequate notice. The main reason for suchnotice is to enable the employer to find areplacement for the employee in question. Theprocedure is that the court determines whatnotice the employee should have provided tothe employer. The major factor in thisanalysis is how long it should have taken theemployer to find a comparable substituteemployee. If the employee provided lessnotice than this, the employer is entitled towhatever damages had been incurred during thisperiod of notice."

VI. CONSTRUCTIVE DISMISSAL

A. INTRODUCTION

As the descriptive nature of the term "constructive

dismissal" indicates, this is in reality a situation where the law

"constructs" a dismissal where one has not occurred in an obvious

fashion, ie. by clear written or verbal advice to the employee that

he or she has been dismissed. Many times the termination of this

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nature can have elements of resignation and dismissal, and at the

same time allow for arguments about express or implied terms in the

employment contract which mayor may not allow for the conduct of

the employer or the employee in the specific circumstances.

As will be seen from what follows, courts have a good

deal of flexibility in deciding the outcome in any particular case,

and this is an area where particular attention must be paid to

facts that might distinguish one situation from another. There

are, however, certain basic concepts and principles which will

apply in any situation of alleged constructive dismissal. There

are also some fairly well recognized areas where constructive

dismissals have consistently been held to have occurred. These

will be canvassed, but it should be kept in mind that these are not

"categories" of constructive dismissal, but rather examples of

application of the concept to particular fact situations which tend

to arise more often than others.

B. WHAT IS CONSTRUCTIVE DISMISSAL?

While a constructive dismissal situation can arise in the

context of fixed term contracts, the vast majority of litigation

has been in situations of indefinite term contracts, and that will

be the focus here.

To understand the concept of constructive dismissal in

the context of indefinite term contracts, one must keep in mind

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that the breach of the indefinite term contract is not the fact of

the dismissal itself, but rather the fact of failure to provide

reasonable notice of termination or pay in lieu thereof. A change

in a term or condition of the employment relationship can be

equivalent to a termination. Theoretically, then, an employer can

avoid a constructive dismissal situation by giving the employee the

appropriate notice that the change is going to occur. I f such

proper notice is provided, then there is no breach of the

employment contract.

By way of example, if an employer intends to make changes

to its commission structures, advance notice that the change will

occur can avoid successful claims of constructive dismissal. The

proper length of such notice would, of course, depend on all those

factors which will be taken into account in determining notice

periods. Where a change affects all employees, this may mean a

different period of notice for different employees. In many

circumstances, however, it is not possible for business efficacy

reasons, for an employer to provide reasonable notice of changes

in the terms and conditions of employment, and if an employee is

unwilling to accept a change without notice, a constructive

dismissal can occur.

The action of the employer in making a unilateral change

to the employment contract without providing reasonable notice that

the change is to occur, amounts to repudiation of the employment

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contract. It is easy to fall into the trap of viewing the change

i tsel f as the breach of contract, but that is incorrect. The

breach is the attempt by the employer to make the change in the

employment relationship without proper notice. Such a change

without proper notice, then, allows the employee to either accept

the repudiation and treat the contract as wrongfully terminated or

alternatively accept the change and continue the relationship

(theoretically with the right to sue for the damages caused by the

breach) .

If authority is required for this basic proposition, we

can turn to the text writers for some guidance. Levi tt, in

Wrongful Dismissal in Canada, tells us that termination by the

employer is ."any act on the part of the employer that repudiates

the essential obligations imposed upon him by the contract of

employment." (at p.43). Harris, in Wrongful Dismissal, at p.3-

6, puts the matter this way:

" ... It is well accepted that in breach of afundamental term of the employment relationshipby the employer will give rise to liabilityshould the employee choose to treat that breachas a repudiation of the contract of employment.This is true despite the employer's intentionto keep the employment relationship in tact.The decision by the employee to accept theemployer's breach as a repudiation of thecontract will give rise to an obligation onthe part of the employer to provide damages inlieu of proper notice of termination.

"In order for the employee to treat thecontract as at an end, there must be a'repudiation by [the employer] of the essentialobligations imposed on him by the contract'(Batt, Master and Servant, at page 22). An

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employee who alleges constructive dismissalfrom employment resulting from a breach of anessential term of the employment contract has

. the onus of proving that breach on a balanceof probabilities (Cadenhead v. UnicornAbrasives of Canada Ltd. (1985),5 C.C.E.L.241 per Cromarty, J.)

"The principle which emerged from the Re RubelBronze is, therefore, that if the changeeffected is minor, or if the change reflectsa proper interpretation of an existingprovision of the employment contract, theemployee may not consider such a change to bean act of repudiation. However, if aparticularly important term is unilaterallyal tered, the employee may have his or herremedy." [emphasis added]

See also Schwann v. Husky oil Operations Ltd. (1989), 76 Sask.R.

97 (C.A.).

Another way in which the constructive dismissal situation

has been characterized is that when an employer makes a unilateral

change without the appropriate notice, that really amounts to

termination of the old employment contract and an offer of a new

employment contract. If the employee accepts the new terms and

condi tions, then there is a new employment contract. If the

employee does not accept, there's no new contract and he or she may

sue for breach of the original contract. Theoretically, the

employee accepting the new offer could sue for breach of the

original contract, but the damages would be minimal in most cases

because they would be the difference if any between the old

remuneration and new remuneration: See for example, Campbell v.

McMillan Bloedel, [1978] 2 W.W.R. 686 (B.C.S.C.). From a practical

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point of view, the employer who accepts a new position does not

usually feel comfortable in suing his or her employer.

In every situation, then, one must look at the facts of

the case to determine if what has occurred amounts to a breach of

a significant term of the employment relationship. If yes, the

employee can, subject to such requirements as mitigation, treat the

employment contract as at an end. If no, then the employee has no

repudiation to accept, and he or she will be in breach of the

employment contract by resigning in purported acceptance of a

repudiation.

Most often constructive dismissal arises in situations

involving changes to remuneration and benefits, changes to job

responsibilities, geographic transfers, or demands for resignation.

While this is the case, it is inappropriate to categorize them as

situations that will always give rise to a constructive dismissal.

This is for two reasons. First, one can fall into the trap of

thinking that if a constructive dismissal has been found in a

particular situation before, it will automatically be found again.

Conversely, categorization also tends to result in self-imposed

blinders to new situations where the law would find a constructive

dismissal because of the particular employment relationship.

At the risk of being repeti tive, lawyers should be

cautioned that one cannot categorically say that every transfer of

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function or every decrease in remuneration will be a repudiation

of the employment contract allowing the employee to accept and sue

for damages. In each case, the employment relationship must be

explored. Specific attention should be given to the following:

1. To examine the whole employment relationship to see if

the contract allows for the change in question. If it

does allow for the change, either expressly or impliedly,

there is no breach. If it does not allow for the change,

then there is a breach.

2. Having found a breach, determine if it is a breach of a

fundamental term of the employment relationship. If it

is, then the breach amounts to ~epudiation by the

employer which can be accepted by the employee.

C. SOME PRINCIPLES TO KEEP IN MIND

One issue which has arisen from time to time is the

question of how long the employee has to decide whether to accept

the employer's repudiation of the contract or alternatively accept

the "offer" of the new employment. Campbell v. McMillan Bloedel,

supra, is often cited for the proposition that the employee has a

reasonable time in which to decide whether or not to accept the new

offer. Cases such as Tingle v. Bird, and Roberts v. Versatile,

supra, also allow the employee to "tryout" the new position for

a reasonable time to decide whether or not to accept the same.

This issue is contrasted to and discussed further with the

principle of mitigation under section E, infra.

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Once the employee has accepted the change in the

employment relationship, the claim of constructive dismissal is

forfeited. In Holgate v. Bank of Nova Scotia (1988), 78 Sask.R.

175 (Q.B., per Noble, J.), upon abolishing Holgate's position, the

Bank offered him a trainee position without loss of salary or

benefits. He accepted, and when the training period ended and he

was offered a credit manager's position in Prince Albert, he

refused to move. As a result of the refusal he was terminated.

The court concluded at p. 178:

"In any event, I am of the view the defendantbank's scheme to re-establ'ish the plaintiffwi thin the organization was both reasonableand fair. It was open to the plaintiff toreject the retraining proposal when it wasoffered to him but he chose not to. By goingalong, he led the bank to believe he wassincere and interested in the prospectiveposition of Assistant Manager - Credit. Hisrejection of the job in Prince Albert came toolate and was tainted by other considerationsand as a result he forfeited his claim toconstructive dismissal."

It is useful to note that in the Holgate case, the plaintiff had

accepted the trainee position and had held the same for a period

in excess of six months, when he objected to the move to Prince

Albert. This case serves as an example of one where the employee

was held to have accepted the position, but can be contrasted to

cases such as Campbell v. McMillan Bloedel Limited, supra, where

the employee took the job and upon trying it out was not satisfied

with the same, and Tingle v. Bird, supra, where it was held that

the plaintiff was entitled to assume he would be given an

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opportunity to find out if he would accept the lesser position on

a permanent basis.

In this context, there is one other related issue which

is the question of when the notice period begins to run in the

constructive dismissal situation. There has been discussion from

time to time as to whether the notice period begins from the date

of the demotion or the date of resignation (see for example Levitt

at p.47). In the Jeffrey case, supra, it appears to be assumed

that the notice period begins to run when the employee receives

notice that the change is to take place. This would not

necessarily be the date of the demotion itself or the date of

resignation, but would rather be the date on which the employee is

informed that the change is to take place. If, as we have said

earlier, the breach of the contract is the failure to give

reasonable notice, then it also only makes sense that the notice

period begins to run from the date on which notice of the change

is given, even if the acceptance of the repudiation is at a later

time.

D. EXAMPLES

1. Generally

This part of the paper focuses on a few common examples

of constructive dismissal situations. The possible situations

where constructive dismissal could be found are limited only by the

ingenuity of employers in attempting to rid themselves of unwanted

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employees, and the situations of need for change which often face

employers. Levitt, at page 48, indicates the following to be the

types of changes which have traditionally been litigated:

(a) forced resignation;

(b) demotion;

(c) reduced remuneration qr refusal to pay;

(d) downward change in reporting functions;

(e) unilateral change in job responsibilities;

(f) forced transfer;

(g) abusive treatment;

(h) reduced work week, unpaid overtime, compulsory leave of

absence;

(i) short-term layoff.

2. Demand for Resignation

The situation of the demand for resignation is perhaps

the simplest form of constructive dismissal, and the one which

causes the least argument. When an employer asks for the

resignation of an employee in circumstances where just cause for

dismissal does not exist, the demand for the resignation is

equivalent to a removal from employment, and the employee, even if

he or she resigns, will have been in law dismissed and damages will

flow accordingly. A recent Saskatchewan case illustrating this

point is Ewasiuk v. Estevan Home Care Inc. (1985), 42 Sask.R. 38

(Q.B., per Geatros, J.). In that case, a member of the board of

the employer met with the plaintiff and demanded her resignation.

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) If she did not provide the resignation she would be dismissed. The

plaintiff did provide a resignation, but the court held that the

demand for the plaintiff's resignation was the equivalent of a

dismissal, and therefore the employer was liable for damages in

lieu of notice.

3. Change in Remuneration/Benefits

Very often, a change in remuneration and/or benefits will

also be accompanied by a transfer to a position of less authority

or less prestige. It is sometimes not possible in a particular

case to determine whether it was the change in remuneration or the

change in position or both which the court found to be the

repudiation of the contract by the employer. There have, however,

been cases where a change in remuneration and/or benefits alone has

been held to amount to a repudiation of the employment contract.

The recent case of Jeffrey v. Plant Forest Products

Corporation (1990), 86 Sask.R. 214 (Q.B., per Estey, J.),

illustrates this point. In that case a sales representative of the

defendant who had been employed with the defendant for some 31

years was advised that he could either accept a change from being

a salaried employee to being a commissioned salesman, or otherwise

face termination. The trial judge found that the proposed change

in remuneration structure was a fundamental change in the

calculation of the plaintiff's compensation which was enacted by

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the defendant unilaterally and amounted to a fundamental breach of

the contract. It is useful to note, however, that the trial judge

also found that if the plaintiff had agreed to the method of

compensation based solely on commission, he would have suffered a

reduction in income. It is not clear from the case whether the

change in remuneration structure without reduction in income would

have been sufficient.

4. Demotion/New Job Responsibilities

It would not be inappropriate to suggest that the

majority of constructive dismissal cases, whether successful or

not, arise in the area of demotions or changes to job

responsibilities different from those previously performed by the

plaintiff. The results in some circumstances are easily predicted

because the proposed or implemented change is a clear demotion or

the new job responsibilities are so clearly different from the old

that no conclusion but constructive dismissal can be reached unless

there are clear contractual terms allowing for the change. So, for

example, in Kenzie v. Standard Motors (77) Ltd. (1985), 40 Sask.R.

228 (Q.B. per Maurice, J.), a demotion from sales manager to

salesman was found to be a constructive dismissal with virtually

no discussion of the point. The British Columbia case of O'Grady

v. I.C.B.C., infra, is also an example.

Another similar example is Tingle v. Bird Construction

Company Limited (1983),26 Sask.R. 20 (Q.B., per Malone, J.), where

)

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the court found a constructive dismissal in circumstances where the

plaintiff was offered the choice of termination of employment or

a demotion to a less senior position which included a salary freeze

and a loss of the fringe benefits he had enjoyed in his former

position. The change in Tingle involved a geographic transfer as

well, but there does not appear to be any suggestion in the case

that the transfer was in breach of the contract. See also

Larochelle v. Kindersley Transport Ltd., infra.

5. Transfers

As will be seen from the discussion under heading 6

infra, it is sometimes very difficult to distinguish in a

particular case what change or changes in the employment

relationship were the key ones in leading a court to decide that

an employee has been constructively dismissed. So many of the

cases such as Roberts v. Versatile, infra, involve changes in job

function and/or salary in addition to geographic transfers, and

while it is also difficult to find cases where a geographic

transfer is the only issue in question, the leading case appears

to be the Saskatchewan case of Page v. Jim Pattison Industries

Limited [1982] 5 W.W.R. 97 (Q.B., per Walker, J.), [reversed on

other grounds at [1984] 4 W.W.R. 481 (C.A.)]. In that case, the

employer decided to close its Saskatoon office and transfer the

plaintiff to Calgary. When he refused the transfer, he was paid

the statutory two weeks severance pay and brought an action for

wrongful dismissal. There was no written agreement with the

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employee. The issue then became whether there was an implied term

in the contract requiring the employee to accept transfers. If

there was such an implied term, then the transfer to Calgary was

not a breach. On the other hand, if there was not such an implied

term, then the employer was in breach and the employee was entitled

to damages. After a review of previous law in the area, Walker,

J. at the trial level concluded at p.106-l07:

"The indication is that a large national orinternational corporation, with severalbranches in different cities, acting in goodfaith and in protection of its own businessinterests throughout, may have, in propercircumstances, the benefit, in a contract ofindefinite employment, of a factually impliedterm that the employee will accept allreasonable regional transfers not involving ademotion, on the basis that such transfer isan ordinary incident of the particularemployment. It is to be kept in mind that suchtr.ansfer is often concurrent with an increaseof salary and responsibility. The questionwhether a term is to be implied in a contractis a question of law not fact, depending on thefacts as found.

"I find a factually implied term in theplaintiff's oral contract of employment withthe defendant that the plaintiff would acceptall reasonable regional transfers not involvinga demotion or undue burden or hardship. Theconcept of reasonableness has to do, interalia, with the giving of an option to anemployee to transfer or not, unless there be,for example, a closing. I do so, inter alia,upon a consideration of the defendant's size,its area of operation, branches, number ofemployees and its original base in the Provinceof Alberta. I do so upon a consideration ofthe place of transfer in the defendant'soperations. I accept that transferring was 'away of life' with the defendant. I do so ona consideration of the plaintiff's approach tohis original employment with the defendant.It is difficult to conceive of a company thesize of the defendant not having the right to

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trans fer, on an executive level, subj ect alwaysto bona fides, reasonableness and a promotionof its own business interests, on the one hand,and absence of undue burden or hardship to theemployee, on the other, provided the transferdoes not involve a demotion or some otherfactor demeaning to the employee." [emphasisadded]

The Court of Appeal accepted that analysis of the situation by the

trial judge.

In assessing any particular situation, keeping in mind

those factors referred to by Walker, J. in the Page case, this

writer would suggest that in the absence of an express contractual

term, cases of geographic transfer without demotion or downgrading,

will fallon a continuum. At one end of the spectrum, an implied

term such as that suggested by Walker will be found in

circumstances where there are very large employers with branches

in various geographic locations, and with practices of transferring

employees between those branches. On the other end of the

spectrum, a one location employer opening up a new location would

likely have some difficulty alleging such an implied term in that

fact situation. Most cases will fall between those two extremes,

and the facts must be examined in each case to determine the

result.

6. Multiple Changes

In many cases, several changes are implemented at once.

These can involve transfers, demotions, salary reductions, benefits

24

reductions and many other factors or combinations of factors at one

time. In these situations it is useful to remember that anyone

change if significant enough will amount to a breach of the

employment contract, and that many changes together can also amount

to a breach.

A recent example of such a case is Roberts v. Versatile

Corporation et al. (1987), 53 Sask.R. 219 (Q.B. per Batten,

C.J.Q.B.). In that case the plaintiff was offered a new position

at the same salary, but with no commission and no use of a car,

which had both previously been part of his employment package. The

new position was also a demotion from a structural point of view

and required a relocation. The offer in those circumstances was

held to be a constructive dismissal.

E. MITIGATION

There is conflicting, but perhaps reconcilable, case law

on the question of whether or not an employee must accept an

alternative position offered by the employer in mitigation of his

or her loss, and only leave that position once alternative

employment has been found. On the one hand, we have the principle

that an employee must act quickly (ie. at least reasonably) in

accepting the employer's repudiation of the contract or accepting

the "offer" of new employment.

25

On the other hand, some cases dealing with mitigation,

have held that an employee should have taken the offered position

in mitigation of his or her loss. The classic statement with

respect to the duty to mitigate is found in the judgment of Laskin,

J. in Red Deer College v. Michaels (1975), 57 D.L.R. (3d) 386, at

390:

.. The primary rule in breach of contractcases, that a wronged plaintiff is entitled tobe put in as good a position as he would havebeen in if there had been proper performanceby the defendant, is subject to thequalification that the defendant cannot becalled upon to pay for avoidable losses whichwould result in an increase in the quantum ofdamages payable to the plaintiff. Thereference in the case law to a I duty I tomitigate should be understood in this sense."

For a number of years cases such as O'Grady v. Insurance

Corporation of British Columbia (1976),63 D.L.R. (3d) 370 had been

cited for the proposition that an employee whose position is

discontinued on inadequate notice need not, in order to mitigate

his or her loss, accept any offer of employment in a different

position with the same employer. That case was a situation where

the offer of employment in a different position involved a

substantial loss of prestige. The plaintiff had been general

)

counsel and secretary of the corporation and upon elimination of

his position had been offered the position as counsel in charge of

a specialized field of litigation,. The court found it unreasonable

to expect O'Grady to take the new position in mitigation of his

loss.

26

It is now clear, however, that O'Grady does not establish

rule applicable to all situations. For example, Halvorson, J. in

Boyes v. Saskatchewan Wheat Pool (1982), 18 Sask.R. 361,

distinguished O'Grady in the following manner at p.366:

"As to the first point [the argument that theplaintiff ought to have minimized his loss bytemporarily accepting lesser employment withthe employer], I am aware of decisions such as0' Grady v. Insurance Corporation of BritishColumb i a (19 76 ), 63 D. L . R. ( 3d ) 370 , whi c hstate that the refusal by a wrongfullydismissed employee to accept a demotion is nota factor to be taken into account on thequestion of mitigation of his damages.Notwithstanding these decisions, I am of theopinion that there should not be an unyieldingrule on this issue, and that each case shouldbe viewed on its own facts. In somesituations, of which 0' Grady is a good example,it would be inappropriate to expect theemployee to work at the lesser job whileseeking another position. Other situationscall for less sensitivity by the employee."

Indeed, a closer look at the O'Grady case indicates that on the

facts of that case, the court had held that where there was a

substantial loss of prestige, it was not appropriate to require

the employee to take the position in mitigation of his loss.

More recently, the Ontario Court of Appeal has dealt with

this issue in Mifsud v. MacMillan Bathurst Inc., (1989), supra.

After referring to the authority of the Red Deer College case, the

court went on to state at page 722:

"There is no doubt that the duty of theplaintiff to take steps to mitigate his damagesapplies in all wrongful dismissal cases. Thequestion is simply whether or not the stepstaken by the plaintiff were reasonable.

27

"The fact that the transfer to a new positionmay constitute in law a constructive dismissaldoes not eliminate the obligation of theemployee to look at the new position offeredand evaluate it as a means of mitigatingdamages. In all cases, comparison should bemade to the contractual entitlement of theemployer to give reasonable notice and leavethe employee in his current position while asearch is made for alternate employment. Wherethe salary of fered is the same, where theworking conditions are not substantiallydifferent or the work demeaning, and where thepersonal relationships involved are notacrimonious (as in this case) it is reasonableto expect the employee to accept the positionoffered in mitigation of damages bearing areasonable notice period, or until he findsacceptable employment elsewhere.

"It must be kept in mind, of course, that thereare many situations where the facts wouldsubstantiate a constructive dismissal but whereit would be patently unreasonable to expect anemployee to accept continuing employment withthe same employer in mitigation of hisdamages."

In the Mifsud case, the plaintiff was reassigned from a

position of supervisor to a position of foreman at a different

plant. There was no reduction of salary, but the new position

involved shiftwork, was at a lower level, had reduced prospects of

promotion and had reduced responsibilities. The Court of Appeal

held that in those circumstances if the plaintiff had acted

reasonably to mitigate his damages, he would have accepted the new

terms of employment and sought alternate employment in the

meantime. It is useful to keep in mind when attempting to apply

or distinguish Mifsud that it appears the court would not have

28

found failure to mitigate where the employee would be working in

a difficult situation.

The most recent Saskatchewan case in this area is the

decision of Hunter, J. in Larochelle v. Kindersley Transport Ltd.

(Queen's Bench Action No. 4175 of 1989, Judicial Centre of Regina,

Judgment dated December 5, 1990). In that case, Hunter, J. found

that the plaintiff had failed to mitigate his damage when he had

refused to take a different position with a sister company to the

employer. Both positions were of a management nature, but she

found there was enough of a difference between the two positions

to found a constructive dismissal. As a result of the failure to

reasonably mitigate, the plaintiff's damages were reduced to

$500.00, which was the amount of a bonus he would have received in

his old position, but not in the new. The case also raises some

other issues and is currently under appeal.

One can also contrast this case to Gormican v. 303507

Saskatchewan Ltd. et al. (1988), 66 Sask.R. 105, where a manager

was held not to be required to take a salesman's job in order to

reasonably mitigate his damages. See also Roberts v. Versatile,

supra, at p. 222, paragraph 16.

As a result of all of the foregoing, we can now say that

in appropriate circumstances an employee will be required to take

an alternative position offered by the employer in reasonable

29

mitigation of his damages. It may be difficult to assess what

those circumstances might be, and as the Larochelle and Mifsud

cases illustrate, a wrong decision on the part of the employee can

result in dire consequences to that employee.

Perhaps some guidance in this area can be obtained from

those cases where an employee who has been dismissed is found ~o

have failed to mitigate his or her loss. Those persons are

expected to take reasonable steps to mitigate the loss.

Reasonableness does not mean the employee is expected to take any

position that might become available. Alternate employment should

be comparable to the previous position. The person is not required

to take a position where the working conditions would be

intolerable. That would not be reasonable. The court should

likewise look at whether it is reasonable to expect the person to

accept the alternate employment offered by the employer, and in

deciding whether it is reasonable, the court should ask: If this

employee had been offered this position by another employer, would

reasonable mitigation have required the employee to take that

posi tion given the terms of employment, the position and the

anticipated working conditions? I throw this suggestion out for

consideration, as it seems such an approach would put the employee

who is offered alternate employment in the same position as the

employee who is dismissed without such an alternate offer. Such

an approach would also explain the differing results in most of the

cases to date.

30

From a practical point of view, by accepting the

alternate employment, an employee operates from a position of power

in applying for employment elsewhere. When at all possible, if

contacted prior to an employee making a decision on an offer that

would be a constructive dismissal, the employee should be

encouraged to try to put aside the distaste for what the employer

has done, and to do what is best for herself or himself in the long

run. It is much easier to obtain alternate employment when you

already have employment. Gaps in employment don't look good on a

resume. Employers tend to think if there have been problems in

previous employment, maybe the employee was the problem. - And you

never know. - The new position may work out. If not, the employee

has maintained a steady stream of income and avoided the inevitable

stress and bitterness that comes with unemployment.

VII. FRUSTRATION

As with contracts generally, for an employment contract

to be frustrated, the frustrating event must not be caused by the

party claiming frustration: see Kendall v. Ivanhoe Insurance

Managers Ltd. (1985), 10 C.C.E.L. 246 (Ont.H.C.). The case most

often cited for the principle that frustration applies to

employment situations is Zieger et al. v. Shiffer and Hillman Co.

Ltd., [1933] O.R. 407 (C.A.). That. case dealt with an attempt by

an employer at union busting, where the employer agreed to hire the

plaintiffs if they left the union in question. The union's

31

response was violent acts, as a result of which the employer

capi tulated to the union's demands. The court held that the

plaintiffs' contract with the employer had been frustrated.

In this province, frustration has been found to occur in

Thomas v. Lafleche Union Hospital Board, [1989] Sask.D. 1297-04

(Q.B., per Maurice, J.), in a situation where the employee lost her

status as a registered nurse. In those circumstances, Maurice, J.

held that the loss of status as a registered nurse excused the

parties from further performance of their obligations under the

contract. No notice was required in those circumstances.

Perhaps the most usual situation in which frustration

might be alleged is that of illness of an employee. Butterworth's

Wrongful Dismissal Practice Manual has this to say at page 248:

"One case has stated that the important factorsin deciding whether an illness is a frustratingevent are: the nature and expected length ofthe illness; the prospect of recovery; and, toa lesser extent, the length of service. Thegreater the degree of incapacity, the longerthe period of illness and the greater thelikelihood of persistence, the more likely itis that the illness has frustrated thecontract. The period during which an employeereceives disability benefits may postpone thetime of frustration."

The case cited in support of this statement is Fazekas v. Ault

Foods Ltd. (1989), T.L.W. 912-038 (Ont.S.C.). If faced with a

si tuation where illness might be a frustrating factor,

practitioners should be cautioned to carefully review the case law

32

relative to the facts of the particular case before advising a

client on whether the particular illness will amount to a

frustrating event which would alleviate the need for reasonable

notice.

AMW:dmm