In Johnson v Country Hills Chrysler Dodge Jeep Ram Ltd., 2026 ABKB 629 (Justice Ashcroft), the Alberta Court of King’s Bench found that two long serving employees of a vehicle sales dealership were constructively dismissed and entitled to damages for common law reasonable notice.
This case is important because it serves as a reminder of fundamental constructive dismissal and resignation principles in employment law.
Facts
The following were the pertinent facts summarized by the ABKB:
- The two plaintiff employees, Mr. Johnson and Mr. Bedard, worked for Country Hills Chrysler Dodge Jeep Ram Ltd. (“Country Hills”) as Finance and Insurance Managers (“F & I Managers”)
- Johnson worked for Country Hills for around 21 years
- Bedard worked for Country Hills for around 13 years
- Both employees were compensated entirely through commissions calculated as a pool and divided equally among F & I Managers
- Leading up to March 1, 2018, there were four F & I Managers who rotated on a set four-week schedule
- In February 2018, one of the F & I Managers resigned
- On March 1, 2018, the F & I Managers were provided a memo regarding their compensation and work schedules (the “2018 Memo”)
- Johnson and Mr. Bedard sued for constructive dismissal alleging the 2018 Memo unilaterally changed the terms of their employment by reducing their commissions while increasing their working hours
- Country Hills defended and claimed both employees resigned and were not constructively dismissed as the 2018 Memo provided a similar commission structure to the previous compensation structure and that the new work schedule was flexible and simply existed to provide for coverage in the dealership
Analysis / Conclusion
The Court decided this matter through its streamlined trial process.
Justice Ashcroft began with the established principle that constructive dismissal can arise from a single unilateral act that breaches an essential term of an employment contract, or from a series of acts that, taken together, demonstrate that the employer no longer intends to be bound by the contract.
The Court first found that the 2018 Memo was a directive from the employer that was mandatory and effective immediately. The Court then considered whether the 2018 Memo amounted to a significant unilateral change to work hours and a significant unilateral change to the compensation of each employee.
Change to Work Hours
The Court found that the 2018 Memo increased the hours Mr. Johnson and Mr. Bedard were expected to be at the dealership from roughly 38 hours per week to around 50 hours per week. Country Hills argued that the schedule was flexible and that they did not track F & I Managers’ hours. Nonetheless, the Court found that the F & I Managers were required to be present at the dealership during their scheduled shifts. The Court held that the increased hours constituted a significant unilateral change to essential terms of Mr. Johnson and Mr. Bedard’s contracts amounting to constructive dismissal.
Change to Compensation
Justice Ashcroft provided a lengthy analysis of whether the change to the F & I commission structure amounted to a substantial change to an essential term of their employment.
A major factor was a change in the split: under the existing compensation structure, the 20% commission pool was divided equally among the number of F & I Managers. With only three F & I Managers remaining, the employees expected that the commission pool would therefore be split three ways. However, the 2018 Memo not only changed the commission to a flat 5%, but stated that if and when a fourth F & I Manager was brought on, the commission would be further reduced to 4%
Country Hills argued that the new commission structure was similar to the previous arrangement and that changes to compensation had occurred throughout the employees’ tenure. However, there was no written term permitting Country Hills to substantially change the commission structure without notice.
Justice Ashcroft emphasized that remuneration is at the heart of employment and goes to the root of the employment contract. The Court rejected the argument that Country Hills had an implied operational right to make substantive changes to remuneration without notice that the employees were required to accept.
The Court held that the changes to the commission structure constituted a unilateral change to an essential term of the employees’ contracts which amounted to constructive dismissal.
Taken separately or cumulatively, the Court found the unilateral changes to the employees’ work hours and compensation, made without notice, changed essential terms of the employment contracts and showed the employer no longer intended to be bound by the contract.
Accordingly, both employees were found to be constructively dismissed on March 1, 2018.
The Court found a reasonable notice period of 22 months for Mr. Johnson and 15 months for Mr. Bedard. They were each awarded the severance pay corresponding to this period. The Court did not award aggravated damages for mental distress caused by the dismissal or punitive damages for conduct that is extremely harsh, vindictive, malicious or reprehensible.
Alternatively, Mr. Johnson’s Employment was Terminated
The Court also considered whether Mr. Johnson had resigned during a tense meeting with the General Sales Manager a few days after the 2018 Memo was introduced. Mr. Johnson disputed signing the resignation letter.
The Court found that whether he signed the resignation letter or not was not determinative. A valid resignation must be clear and unequivocal, considering both whether the employee intended to resign and whether a reasonable employer would have understood the employee to have resigned.
The Court found that Mr. Johnson did not intend to resign. He had attended work early that morning intending to work, and the circumstances surrounding the resignation letter were rushed and high conflict. The Court found that the General Sales Manager intended either to terminate Mr. Johnson or push him to sign the resignation letter.
Accordingly, the Court found that Mr. Johnson had not resigned and, alternatively, that Country Hills terminated his employment during the meeting.
My Take
At the end of the day, the main reason people work is for a paycheque. Major changes to this fundamental element of an employment contract, made without notice, will almost always run the risk of being considered constructive dismissal. The same is true of significant changes to an employee’s working hours, particularly where an employee is effectively being asked to work more for less.
This case is also a good reminder that context matters. Even a signed resignation letter does not necessarily tell the full story of whether an employee clearly and unequivocally resigned.
Employees facing changes to their work hours, compensation and other terms of employment should speak to an employment lawyer as soon as possible. A full 1-hour constructive dismissal consultation is recommended.
Bow River Law provides these regular legal blog articles for the purposes of legal news, education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.
This blog post is an original work of Bow River Law LLP. The original publication of this article is on Bow River Law’s website blog.
