The Ontario Court of Appeal recently gave employees and employers a valuable reminder: a breach of an employment contract does not, in and of itself, constitute a constructive dismissal. Even if the breach translates into hundreds of thousands of dollars not being paid.
In Chapman v GPM Investment Management, the former CEO and president of GPM, a real estate management company, claimed he had been constructively dismissed by GPM after GPM failed to pay him his entire bonus.
The employment contract stated that the employee was to be paid a percentage of GPM’s pre-tax profit as a bonus. When calculating the employee’s bonus, GPM decided to exclude the profit it had earned on the sale of a certain property. The employee disputed this calculation, which had reduced his bonus by $329,687.
For an employee to successfully argue that he or she was constructively dismissed by a unilateral act, he or she must demonstrate that (1) the employer breached the employment contract, and (2) the employer substantially altered an essential term of the contract.
The trial judge had found that GPM’s bonus calculation was incorrect and that the employee was entitled to the $329,687. Thus, GPM had breached the employment contract. However, the Court of Appeal upheld the trial judge’s holding that the dispute between the employee and GPM was merely a dispute over interpreting the employee’s bonus scheme. In other words, GPM had not altered the employment contract.
The Court of Appeal highlighted that, once the bonus wasn’t paid, the employee could have pursued dispute resolution alternatives to settle the disagreement. Suing GPM was not his only option. Thus—despite the large sum of money GPM had refused to pay its employee—the Court of Appeal ultimately determined that the employee had not been constructively dismissed.
Written with the assistance of John Schudlo, articling student.