In Twilley v Alberta, 2025 ABKB 587, the Alberta Court of King’s Bench addressed an important question about the scope of legislative limits on termination pay for public sector employees. The Court held that caps on severance pay introduced in 2019 apply equally to constructive dismissal claims as they do to express terminations without cause.
This case is important because it appears to be the first decision to consider whether the constructive dismissal of a public sector worker would engage the severance cap applicable to an ordinary wrongful dismissal without notice.
Facts
The key facts are as follows:
- The Applicant worked as a non-unionized public sector employee in Alberta from March 4, 2019 until April 18, 2024.
- On April 19, 2024, the Applicant filed a statement of claim alleging constructive dismissal.
- The parties agreed that the Public Service Act governed the Applicant’s employment.
- In 2019, the Legislature amended the Public Service Act through the Ensuring Fiscal Sustainability Act. These amendments included adding section 25.01, which limits the notice periods or pay in lieu of notice for employees who are dismissed without cause.
- Section 25.01(3) caps notice periods at a maximum of 78 weeks (based on 4 weeks for every full year of continuous service). Section 25.01(5) provides a specific formula for calculating severance pay: 1.16 × base salary × number of weeks of notice.
- Section 25.03 of the Public Service Act states that the enactment and application of section 25.01 and related provisions “shall not be considered constructive dismissal or breach of contract.”
- The Applicant argued that section 25.01 only applies when the government expressly terminates an employee without cause and does not extend to constructive dismissal. The Respondent argued that section 25.01 encompasses constructive dismissal as a form of termination without cause.
Analysis
The main sections of the Public Service Act relevant to the Court’s analysis are as follows:
Notice of termination and severance pay
25.01(1) In this section and sections 25.02 and 25.04
(…)
(3) Notwithstanding any right existing at common law, an employee who is terminated without cause is entitled to a period of notice of termination no greater than the following
(a) where the employee has less than one year of continuous service, 2 weeks;
(b) where the employee has one or more years of continuous service, 4 weeks for every full year of continuous service up to a maximum of 78 weeks.
(4) Subject to subsection (6), an employee who is terminated without cause may be provided severance pay, determined in accordance with subsection (5), in lieu of all or any portion of the period of notice of termination to which the employee is entitled under subsection (3).
No constructive dismissal or breach of contract
25.03 Neither the enactment or application of this section and sections 25.01, 25.02, 25.04 and 25.05 nor changes to the compensation that is payable to an employee as a result of those sections shall be considered constructive dismissal or breach of contract.
The Applicant argued that the Legislature did not intend for the limitations in section 25.01 to apply to constructive dismissal, but only to limit damages where the government expressly terminates an employee without cause. The basis of the Applicant’s position was twofold: (1) constructive dismissal is a distinct legal concept from termination without cause; and (2) based on the following principles of statutory interpretation, the Legislature could not have intended that section 25.01 encompassed circumstances of constructive dismissal:
- Express Intent Required: When the Legislature intends to limit legal rights, it must do so expressly. Because section 25.01 does not expressly refer to constructive dismissal, Twilley argued the Legislature could not have intended to limit rights flowing from such claims.
- Presumption of consistent expression: Section 25.01 does not include the term “constructive dismissal,” yet section 25.03 does (it expressly states that the implementation of the statutory changes does not amount to constructive dismissal). The Applicant argued that when different terms are used in the same statute, they must have different meanings.
- Ambiguity/ Benefits-Conferring Legislation: The Applicant argued that the Public Service Act is benefits-conferring legislation and therefore ambiguities should be resolved in her favour. She pointed to the heading of section 25.01, “Notice of termination and severance pay,” arguing this supported an interpretation that the provision was not intended to apply to constructive dismissal.
The Court disagreed with the Applicant’s arguments. It’s reasoning can be summarized into two main points:
- The Court found that constructive dismissal is a form of termination without cause, not a separate concept. The Court explained that “terminated without cause” is a longstanding legal term in employment law describing an employer’s right to terminate a non-unionized employee for any reason by providing reasonable notice or pay in lieu. When an employer unilaterally changes the fundamental terms of employment, the law deems the employer to have terminated the contract without reasonable notice. In both scenarios, the damages arising are the same: the employee is entitled to payment in lieu of reasonable notice. The Court cited several cases, including Styles v. Alberta Investment Management Corporation, 2017 ABCA 1. (more on this in My Take section below).
- The Court found that the Legislature had expressly limited rights in both sections 25.01 and 25.03. Section 25.01(3) expressly notes that the cap it imposes applies “notwithstanding any right existing at common law,” amounting to clear legislative intent to limit an employee’s common law rights to damages for all forms of termination without cause, including constructive dismissal. Section 25.03, which expressly states that the changes made by the amendments do not constitute constructive dismissal, was consistent with the intent and purpose of the amendments: to support fiscal responsibility and predictability around termination pay. The Court found that the different terms used in sections 25.01 and 25.03 arose from the different purposes of each section and the obligation to be clear when limiting legal rights, not because the Legislature intended to exclude constructive dismissal from the statutory scheme. Leaving constructive dismissal outside the cap would create an illogical gap inconsistent with the Legislature’s intent.
My Take
This decision raises several concerns about its consistency with established employment law principles and recent jurisprudence, particularly following Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 . It is not clear to me why Matthews was not considered in the Court’s analysis.
Ambiguity?
Section 25.03 of the Public Service Act expressly removes the common law right for public sector employees to claim constructive dismissal arising from the changes imposed under the Act itself (such as the introduction of severance caps). However, it does not expressly address other forms of constructive dismissal that arise through different circumstances, such as breaches of the duty of good faith and fair dealing or unilateral changes to material terms that amount to repudiation of the employment agreement. The Court’s finding that this did not create ambiguity was surprising to me, given the breadth of caselaw that could be used to find otherwise.
It is also worth noting that section 25.01(2)(ii) of the Act expressly exempts certain employees from the severance cap. Specifically, the cap does not apply to employees whose employment contracts specify their own notice period. This shows that the Legislature contemplated situations where the cap would not apply. The Court’s rationale that leaving constructive dismissal outside the cap would create an illogical gap in the statutory scheme therefore seems questionable, since the Legislature clearly accepted that the cap would not apply in all circumstances.
The Court’s Reliance on Styles
The Court’s reliance on Styles was surprising to me. Paragraph 34 of Styles, which the Court in Twilley quoted at length, was expressly deemed incorrect by the Supreme Court of Canada in Matthews. For reference, the relevant passages are reproduced below:
Styles at paragraph 34
It is important to remember that termination without cause does not involve a breach of the contract… The common law implies a term of reasonable notice, or pay in lieu, in those circumstances. The payment in lieu is not “damages” for a breach of the contract, but rather one component of the compensation provided for in the contract. If an employer fails to give proper notice or pay in lieu, the breach is in the failure to pay, not in the termination.
Matthews at paragraphs 73-75:
[73] … In Styles, the Court of Appeal noted that “[t]he common law implies a term of reasonable notice, or pay in lieu, in those circumstances. The payment in lieu is not ‘damages’ for a breach of the contract, but rather one component of the compensation provided for in the contract. If an employer fails to give proper notice or pay in lieu, the breach is in the failure to pay, not in the termination” (para. 34 (footnote omitted)). The Court of Appeal then observed that “[t]here are decisions from other jurisdictions that treat termination as a breach, but they do not reflect the law of Alberta: see for example [Paquette]. Paquette relies on the dictum in [Sylvester], at para. 1, but para. 15 of that decision confirms that it is the non-payment that is the breach, not the termination itself” (para. 34, fn. 1).
[74] … there is no such implied term of the contract to provide payment in lieu (see, e.g., Love v. Acuity Investment Management Inc., 2011 ONCA 130, 277 O.A.C. 15, at para. 44).[3]
[75] … there are three principal reasons why this is an important distinction. First, there are issues surrounding the complexity of an implied term to provide pay in lieu of notice, and whether such a term can readily be implied into an employment contract. Second, implying a term to provide pay in lieu of notice “would mean that if an employer elected to give pay in lieu of notice, the employer would be complying with the contract and not breaking it”, and thus “the contract would require the full payment to be made immediately”. Third, if the employer elected to invoke such an implied term and gave no notice of termination, “there would be no obligation on the part of the employee to mitigate damages by seeking other employment” since the term requires a payment in full without regard to the employee’s actual losses. Ensuring that courts and litigants properly understand this distinction is thus important as it can profoundly affect employees’ financial lives. To the extent that some cases suggest otherwise, I respectfully disagree. [underline added]
In a recent decision that some consider controversial for unrelated reasons, the Alberta Court of Appeal in Kirke v Spartan, 2025 ABCA 40, was plainly following Matthews and not Styles regarding contractual breach at employment termination, starting at the very first paragraph of the decision:
[1] At common law, employers have the right to terminate employment contracts without cause, subject to the obligation to provide reasonable notice. A failure to provide reasonable notice is a contractual breach that can lead to an award of damages.
This distinction is highly relevant. The idea that an employer has a contractual right to terminate immediately and pay contractual damages to satisfy its obligation was expressly rejected in Matthews. The law is clear, particularly following Matthews, that the only proper way to terminate an employee who maintains the implied term of reasonable notice is to provide working notice. An employer who terminates without providing working notice breaches the contract.
Constructive Dismissal and Termination Without Cause are Arguably Distinct
Respectfully, I have difficulty with the notion that constructive dismissal should be analogized to termination without cause in the manner the Court suggests. While constructive dismissal is a form of wrongful dismissal, it is based on contractual repudiation arising from unilateral changes to material terms of employment. The employer does not elect to terminate the relationship; rather, the employer’s conduct forces the employee to treat the contract as at an end. In my respectful opinion, analogizing this to an employer’s deliberate decision to terminate without cause unnecessarily conflates two distinct legal concepts.
In Matthews, the Supreme Court established several key principles relevant to the protection of employees as a vulnerable group in society, recognizing the clear inequality of bargaining power in the employment relationship. One of these principles is that termination clauses must cover the “exact circumstances arisen” in order to displace common law rights. Section 25.01 expressly refers to circumstances where an employer elects to terminate the employment relationship and provide severance pay. Holding that this provision covers circumstances where an employer repudiates the employment relationship and forces an employee to resign is arguably inconsistent with the principles established in Matthews.
Additionally, there is persuasive jurisprudence that has held that some forms of repudiation are so significant that they disentitle employers from relying on a without cause termination provision. See, for example, the conversation by the Court in Humphrey v. Mene, 2021 ONSC 2539 at paras 125-142.
In sum, I would respectfully suggest that the approach taken here risks unnecessarily simplifying what can often be a very nuanced and complicated analysis when an employee faces unilateral repudiation of their employment contract. Given that the Legislature did not expressly refer to constructive dismissal in section 25.01, and that many forms of constructive dismissal are factually and legally distinct from a straightforward without cause termination, a more thorough consideration of Matthews and subsequent jurisprudence may have resulted in a different outcome for the Applicant.
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