Law Times

lAw Times • April 7, 2014 Page 7 www.lawtimesnews.com COMMENT SCC ruling on repudiating employment agreement eagerly awaited n Oct. 10, 2013, the Supreme Court of Canada granted leave to appeal in the case of David M. Potter v. New Brunswick Legal Aid Services Com- mission. e appeal, scheduled for May 12, 2014, will likely be one of interest to many employment law practitioners. One of the issues on appeal is whether an indefi nite suspension with pay consti- tuted constructive dismissal entitling the employee to wrongful dismissal damages. In this case, the employee, David Potter, was the executive director of the New Brunswick Legal Aid Services Commission. Unbeknownst to Potter, the board of directors of the commission had resolved to terminate him for cause unless it reached a ne- gotiated resolution with him beforehand. ereaf- ter and while on sick leave, Potter received a letter from his employer's legal counsel advising him not to return to the workplace until he received further direction from his employer but informing him it would continue to pay him. It provided no reasons for the suspension nor was there an indication of how long it would last. A er about eight weeks of paid suspension, Potter commenced an action for constructive dismissal. In response to that action, the employer cut off Potter's salary and benefi ts. Potter's counsel therea er wrote a letter stating Pot- ter wasn't resigning from his employment. e New Brunswick Court of Appeal held that based on the circumstances, the suspension with pay didn't amount to constructive dismissal and Potter's commencement of his legal action consti- tuted a resignation and a repudiation of his em- ployment agreement. In doing so, the Court of Ap- peal reasoned that the paid suspension would only result in a constructive dismissal if it constituted "a fundamental or substantial change to an employ- ee's contract of employment." e court cited the case of Devlin v. NEMI Northern Energy & Mining Inc. that formulated a list of factors that have traditionally informed the deter mination of the question of whether a sus- pension amounts to a constructive dismissal. ey included the duration of the suspension; whether the employer appointed someone to replace the suspended employee; whether it asked the em- ployee for the keys; whether it continued to pay the employee, including benefi ts; whether there's evidence it intended to terminate the employee at that time; and whether it suspended the employee in good faith with, for example, bona fi de business reasons. e Court of Appeal reasoned that a er the application of these criteria to the facts of the case, there was no palpable and overriding error by the trial judge in the assessment of the evidence. Furthermore, a er referring to the o -cited case of Suleman v. British Columbia Research Council, the Court of Appeal found Potter had elected to repu- diate his contract of employment and resign, thus opening the door to his lawsuit. at action in dam- ages for constructive dismissal failed and the court found it was too late for a withdrawal of the election to terminate and the incidental resignation or for judicial remedial relief. e court further reasoned that Potter did not have to state he was resigning and that what occurred was resignation "by operation of law." It was something the court found Potter had to have intended since it was a corollary to his action in damages for constructive dismissal. In my view, the Supreme Court's review of this decision will have wide-ranging implications across Canada and will provide important guidance to the lower courts, employers, and employees with re- spect to the test for constructive dismissal, whether an indefi nite suspension amounts to it, and whether commencing an action constitutes a repudiation of the employment agreement by an employee who has not established constructive dismissal. It will be inter- esting to see how the Supreme Court will clarify or change the law in these areas and what facts will make Construction legislation misses bridge-building component f you've been wondering about the TV and print advertising campaign urging the legislature to pass bill 69, the prompt payment act, you're not alone. For several weeks, the ads have made it seem as though the construction in- dustry was clamouring for legislation to ensure their trades and general contrac- tors got paid promptly. Indeed, I began to think these poor guys were getting screwed le , right, and centre. But not so fast. ings in politics aren't always what they seem. In a nutshell, bill 69 would set out new rules for payments in construction con- tracts. It was fi rst introduced a few years ago and died before Liberal MPP Steven Del Duca reintroduced it last spring and actually won initial all-party support at second reading. e bill would have entitled "contrac- tors and subcontractors to receive prog- ress payments and to suspend work or terminate a contract if such payments are not made." In addition, payers could withhold payment only if they notify the payee "that a payment application is disap- proved or amended within 10 days a er it is submitted." A third section would require owners to provide contractors and subcontrac- tors with specifi c fi nancial information before entering into a contract. For a while, it seemed to be one of those bills that would clutter up the order paper until it died an unla- mented death when the ses- sion ended. With the future of the government hanging in the balance at every turn over the last year, it really wasn't expected go anywhere until there was a renewed sense of urgency about a month or so ago. Even more curious was the fact that for a piece of legislation that would have a marked impact on the vital construction sector, there was no public consultation. In fact, it wasn't until the industry and related sectors woke up — perhaps the ad campaign helped — and started asking questions that people be- gan to take more serious notice. Last month, Mississauga, Ont., May- or Hazel McCallion came in from her western kingdom to slam the legislation. She wanted to know why the govern- ment didn't consult municipalities. "Mississauga has dealt with many contracts and I can assure you that if this bill passes the way it is, it will have seri- ous implications on the municipalities of Ontario," she told a committee. "I recommend that you do your homework before this passes. We are not at all opposed to small contractors getting paid promptly for the work they do — no ques- tion about it. Who would ever disagree with that? But there's got to be a process — and a proper process — that is followed to justify the pay- ment of a bill by a munici- pality or by the province or by the federal government. is bill does not allow that." Others lined up behind McCallion to trash the bill. From contractors to mu- nicipal lawyers to bond issuers, critics repeatedly described it as fl awed. Other observers noted it seemed to confl ict with the Construction Lien Act itself. McCallion went even further when she suggested the sloppy and ill-defi ned language in bill 69 was more typical of a private member's bill. Speaking for the Fair Payment Re- form Ontario coalition of the biggest construction companies in the prov- ince, Aecon Group Inc. vice president and assistant general counsel Yonni Fushman said: "Bill 69 will play havoc with the way the entire industry oper- ates, aff ecting everyone from home- owners conducting renovations to the successful and timely completion of major projects." e concept of the bill is laudable. Everyone deserves prompt and fair payment, but the consensus is it's just not workable in this form. e last-minute blitz worked. A few days a er a legislative committee began its hearings, the province shi ed gears and said it would launch an independent review of the Construction Lien Act that would include all players in the sector from the private and public owners of projects to architects, engineers, lawyers, and other professionals. So who wanted the fl awed legislation passed to the point where they paid for TV ads? It wasn't a case of big labour versus the bosses, but a split within the industry. On one side were groups representing contractors such as the National Trade Contractors Coalition of Canada and on the other were large construction companies like EllisDon Corp. ey're all going to have their say during the review. It may be a bit of a moot point now given the pending budget act and the continuing revelations relating to the gas-plant closures. Still, for a govern- ment that has struck some 40 or more bodies to do various consultations, it's curious why this bill didn't get that treatment earlier. LT Ian Harvey has been a journalist for 35 years writing about a diverse range of issues including legal and political aff airs. His e-mail address is ianharvey@rogers.com. BY MONTY VERLINT For Law Times O Queen's Park Ian Harvey I the diff erence in the overall analysis. e more interesting issue is whether Potter's commencement of an action constituted a repudiation of the employment agree- ment if the court hasn't found in favour of a constructive dismissal claim. As shown by the facts above, this is not a case where the em- ployee took the active step of leaving the job in response to a substantial change to the employment agreement and then suing for constructive dismissal. On the contrary, the employer had already released Potter from his employment on an involuntary basis as a result of his suspen- sion with pay. e fi nal act of leaving the job may contribute to a court's holding that the employee has resigned or repudiated the employment agreement. Alternatively, that fi nal act of leaving the job could arguably amount to a fi nding of abandonment of employment, thereby amount- ing to the same result. In this case, other than the institution of the action, it appears Potter did not commit any other act that would indicate a res- ignation, abandonment or repudiation of the employment agreement. It will be interesting to watch how the Supreme Court of Canada re- solves all of these issues and the resulting decision that will follow. LT Monty Verlint is a partner at Kuretzky Vassos Henderson LLP. u SPEAKER'S CORNER

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