The Ontario Court of Appeal reviewed a trial decision where an employee claimed constructive dismissal and the employer argued the employment contract was frustrated and the employee voluntarily resigned. In Hill v. 1359768 Ontario Inc. (B&B Towing), 2026 ONCA 577 the appeal examined the alleged analytical errors at trial assessing if the employee had been demoted or merely reassigned, as well as certain damages awarded at trial.
This is not an Alberta decision. However, it hails from the Ontario Court of Appeal so it likely has persuasive weight in Alberta employment law as well.
Facts
- This decision is an appeal of a Superior Court decision (2024 ONSC 5995 (unreported)) where an employee had been successful.
- A long-serving towing service employee, on a medical leave since May, 1, 2020, surrendered his employment, described by the role of “Road Boss” in February 2022, alleging constructive dismissal.
- At the time of the appeal the employee remained on long-term disability leave after surgery with medical restrictions supporting modified duties and a return-to-work attempt.
- The employer stated the managerial Road Boss position was eliminated for financial reasons and offered the employee work as a tow truck driver at lower pay scale.
- On January 5, 2022, the employee returned as a tow truck driver, working under hours limits, then re-injured his back operating the tow truck, despite workplace accommodations.
- The employer’s principals had taken over the employee’s Road Boss duties during the employee’s absence.
- The Superior Court determined as follows:
- He was constructively dismissed;
- His employment contract was not frustrated;
- He was entitled to 22-months reasonable termination notice; and
- The employee’s claim that the two separate defendants were common-employer was rejected.
- The Appellant (Employer) argued on appeal that the trial judge erred:
- on frustration, by not identifying essential duties, not applying the “reasonable likelihood” test, and by wrongly assessing accommodation given physical limitations and the financial conditions of the employer; and
- wrongly awarding damages for loss of use of a company tow truck and cellphone during the notice period.
Analysis / Conclusion
The Court of Appeal applied fundamental principles of the doctrine of frustration, noting that frustration turns on whether a disability makes performance radically different and removes reasonable likelihood of return within reasonable time. In trying to establish frustration, the employer bears the onus of proof that the employee is unable to perform their job tasks. Similarly, workplace accommodations are required up to undue hardship without rewriting significant job components.
The Court of Appeal found the trial court correctly applied the legal test for frustration.
The court held that the employee could have continued performing the role and that there had been little or no hardship to the business in his absence. Frustration could not be established and reasonable accommodation was possible.
Turning to the damages awarded for the personal use of the tow truck and cellphone, the Court of Appeal reversed the trial decision. The court found the employee failed to establish that either of the items were intended to form part of his compensation.
Wrongful dismissal and constructive dismissal damages sometimes include incidental benefits like these, but the employee must prove entitlement and value of any claimed fringe benefit as an intended part of their compensation and not merely a work tool used for business purposes. A company vehicle or phone is compensable only if proven to confer a personal benefit rather than functioning as a work tool.
My Take
Constructive dismissal claims are difficult to navigate for the employee, as it often requires the compounding of their already vulnerable position by a) objecting to the proposed change b) quitting their job and then c) hoping that they can secure their entitled compensation through negotiations or litigation.
If the employee is willing and capable of performing the work duties with reasonable accommodation, then frustration will not be supported.
The case at hand provides guidance of where the line between constructive dismissal, corporate restructuring, and temporary lay-offs might sit.
The employer’s argument that the road boss role was being eliminated for financial reasons and that the employee had to accept a reduction in hours and pay, might have been managed with a temporary lay-off, if the employment contract allowed for that.
For employer side counsel there is a strong reminder that temporary lay-offs could assist in navigating a financial hardship in some circumstances.
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This article is an original work of Bow River Law LLP, first published on Bow River Law’s employment law blog.
