Ontario Court of Appeal upholds record constructive dismissal award

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In a judgment released on May 19, 1999, the Ontario Court of Appeal has upheld an award to a bank executive of $1.7 million for constructive dismissal. The damages awarded in Schumacher v. Toronto-Dominion Bank, reported in the October 1997 issue of FOCUS (see “Bonus payment makes bank executive’s constructive dismissal award the largest ever” on our Publications page), set the Canadian record for a case of constructive dismissal.

Schumacher had risen to the position of Senior Vice President and held the top trading position in the Bank. However, just when Schumacher’s position seemed unassailable, the Bank, without his knowledge, hired another executive to take over two of his five areas of responsibility. The trial judge held that what had occurred was not a mere realignment of functions, but rather a unilateral and fundamental change in Schumacher’s duties and responsibilities.

The Court of Appeal agreed, holding that the “removal of such significant parts of his job, which was not agreed to by Schumacher, objectively represented a demotion or reduction in his job responsibilities.” A reasonable person in Schumacher’s situation would have viewed it as a substantial change to the essential terms of his employment contract.

The Court also shed some light on the extent of a constructively dismissed employee’s obligation to mitigate his or her damages by working in the alternate position offered by the employer. The issue, the Court stated, is whether it is reasonable to expect the employee to accept the new position in mitigation of damages during the reasonable notice period or until he or she finds employment elsewhere. The trial judge had found that Schumacher had never been offered the option of working in his new role during a notice period. Rather, the Bank had demanded that he accept the new position unconditionally before returning to work, and refused to allow him to work while he attempted to negotiate a severance. Nor had Schumacher been told he would be terminated if he did not accept the new arrangement, so he never had the opportunity of choosing between being terminated and working out the notice period. In view of these findings, the Court held, Schumacher could not reasonably have been expected to accept the new position in mitigation of his damages. (For more recent developments, see “Leave to appeal denied by SCC in TD Bank constructive dismissal case” on our Publications page.)

For further information, please contact Carole Piette at (613) 563-7660, Extension 227.