BC Court of Appeal Finds Impatient Employee On Maternity Leave Was Constructively Dismissed

Most employees commence legal action against an employer after formal termination; however, Ms. Jennifer Lewis is part of the small minority who choose to sue before the employment contract has been formally repudiated.  In Lewis v. Terrace Tourism Society 2010 BCCA 346, the British Columbia Court of Appeal grappled with the issue of dismissing employees on leave and the associated legal consequences.  The majority determined Lewis was constructively dismissed when her company voted to shut down, despite being on leave. In comparison, the  dissent written by Frankel J.A. makes a strong case for why employees on leave should be treated differently.

How It All Began

In 2004, Jennifer Lewis began her position as Executive Director of the Terrace Tourism Society. She went on maternity leave at the end of 2006.  A contracted employee was hired to replace her as interim Executive Director during her leave.  Shortly after, the Society found itself in financial trouble as a result of a municipal decision to cut funding. Immediately, the interim Executive Director was laid off and Lewis’ signing authority on bank accounts was removed.  On February 19, 2007 the Society passed a dissolution resolution where they decided the Executive Director position would be removed.

The Society, at this time, recognized it would owe Lewis severance pay as her position would eventually be eliminated (as a result of the company’s closing).  On March 7, 2007 the Society contacted Lewis asking for more information on whether severance had been discussed in her contract. Severance had not been discussed. Twelve days later, Lewis commenced an action against the Society in Small Claims Court for wrongful dismissal.  As a result of the lawsuit, the Society informed Lewis her employment was terminated for just cause.  In July 2007, Lewis sued the employer in the BC Supreme Court for wrongful dismissal and/or constructive dismissal.

The trial judge dismissed Lewis’ lawsuit, finding that she had not been constructively dismissed and that the filing of a Small Claims lawsuit formed the requisite just cause to terminate her employment.  Additionally, the court found that the Society had intended to offer severance to Lewis but could not do this as Lewis had taken a “pre-emptive strike” against the employer by launching the Small Claims case.

Two issues arose on appeal: first, whether the company’s effective shutdown constituted constructive dismissal and second, whether commencing litigation constituted just cause for Lewis’ dismissal.  I focus on the first ground of appeal.

The Court of Appeal Finds Lewis Was Constructively Dismissed

Constructive dismissal occurs when an employer changes a fundamental term or condition of an employment contract without providing reasonable notice of the alteration to the employee.  It is considered repudiation of the contract by the employer, regardless of whether or not the intention existed to continue the employment relationship (Farber v. Royal Trust Co., [1997] 1 S.C.R. 846).  In the case at hand, the issue concerned when and if Lewis could have considered herself constructively dismissed before the company offered appropriate severance (as there was never any question whether the position would be terminated, it only was a matter of when).

Levine J.A. writing for the majority, held that Lewis’ legal right to reasonable notice on termination of her position was not altered upon commencement of a maternity leave.  In determining this, the majority relied on s. 67(1)(a) of the Employment Standards Act, R.S.B.C. 1996 (“Act”), which expressly protects employees on leave from dismissal with notice that coincides with the period of leave.

In coming to this decision, Levine J.A. did not distinguish active employees and those employees on leave.  Instead, she held that Lewis’ job was clearly terminated when the Society resolved to cease operations and eliminate the position that Lewis held.  According to Levine J.A.,

It is irrelevant, in my opinion, that the appellant was not at the time attending her workplace…she knew of these actions, and they could leave no reasonable doubt in her mind that her employment had come to an end.

The majority was not convinced that the employer’s intention to calculate and offer severance was enough to negate a finding of constructive dismissal. Since Lewis was constructively dismissed and her employment contract had been repudiated, she was free to launch a claim in the Small Claims Court.

The Dissenting Judge Provides Convincing Reasons for Differentiating Between Active and Separated Employees

Frankel J.A., dissenting, opted for an approach that took into account the “totality of the circumstances.”

First off, Frankel J.A. referenced ss. 54 and 56 of the Act, which establish minimum standards for treating employees on pregnancy/parental leave.  In interpreting the Act, he determined the “core obligations” of an employment relationship are “held in abeyance during the leave period.”  He went on to describe Lewis’ relationship with the Society as being a “shell” in which she was entitled to recommence being the executive director upon her return.

Next, the judge emphasized that the “totality of the circumstances” is crucial when analyzing a constructive dismissal claim.  In Frankel J.A.’s opinion, the nature of the changes being made with respect to the Society had no immediate effect on Lewis’ employment status.  In his words, “What the Society did was remove a signing authority Ms. Lewis was not exercising, and close a workplace to which she was not going.”

In my opinion, I am inclined to agree with Frankel J.A.’s dissent.  The majority decision sets a dangerous precedent that suggests that employees on leave are immediately constructively dismissed if their position is altered or terminated in the future.  As Frankel J.A. wrote at para. 35, “To conclude otherwise would be tantamount to saying that an employee on leave will have been constructively dismissed whenever an employer begins a process of downsizing or winding up that will result in the elimination of that person’s job.”  Accordingly, employers should given a time period wherein severance can be provided without fear of being accused of constructively dismissing an employee.

The crucial aspect missing in the majority reasoning is that the employer was in the process of calculating a severance package for Lewis.  Lewis commenced litigation twelve non-business days after speaking to a Society committee member. This member was merely asking for more information, and promised to get back to Lewis with respect to her severance package.  At the very least, her decision to launch the Small Claims action was hasty since the Society did not have a chance to provide severance.

I suggest that a more preferable solution would be for employers to be given a reasonable period of time in which to investigate business affairs and calculate appropriate severance pay before an employee may consider themselves constructively dismissed.  If Lewis had been working, she could have received working notice.  Since she was not working, her employer was left the remaining option of severance in lieu of notice.  During the tumultuous time where an organization is disbanding, I would hope the courts would allow employers enough time to accurately determine severance pay.

Employees of this era are more educated on their rights to parental leave. They are entitled to receive these benefits, and should be able to fight for them.  However, it is also important to ensure that courts exercise restraint when considering these types of cases.  If an employee is on leave and cannot be given working notice, then the employer’s circumstances should be considered. In the appropriate circumstances, a “grace period” for severance calculations should be given.