January 1, 2004 By: Janice B. Payne
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Introduction

The recent decision of the Ontario Court of Appeal in Belton v. Liberty Insurance Company of Canada1 adds a new layer to the law of constructive dismissal.2 In Belton, Justice Juriansz overturned the Superior Court of Justice's decision and held that an employee is entitled to "try out"3 an employer's unilateral change to his or her employment contract before making the decision to accept the new terms of employment or quit and sue for constructive dismissal. The significance of this decision rests in the fact that an employee can continue to work in a modified position and decide at a future date that he or she is not satisfied, quit and sue for constructive dismissal. What the decision leaves open, however, is how long an employee is entitled to try out the new terms of employment before he or she is found to have acquiesced to the changes effectively barring successful legal action against the employer.

Facts

Belton was an action brought on behalf of a number of commissioned sales representatives selling life insurance for London Life and property and casualty insurance for Prudential of America General Insurance Co ("PAGIC"). Their PAGIC agent agreements statedthat they were independent contractors and that PAGIC could change the schedule of their commissions with 90 days’ notice in advance. Liberty Mutual Insurance Company purchased PAGIC in 1997 and changed its name to the Liberty Insurance Company of Canada ("LICC").

On January 4, 1999 LICC prepared a new agency agreement, which its agents were required to sign. The new agreement was scheduled to take effect on April 7, 1999. It changed the commission structure and established "minimum production levels" for sales. The agents failed to sign the new agreements, and were terminated on April 7, 1999. They sued LICC for wrongful dismissal taking the position at trial that requiring them to sign the new agreement was a fundamental breach of their employment contracts, which amounted to a constructive dismissal.

Trial Decision

While Justice Dunnet of the Superior Court of Justice found that the agents were employees of LICC and not independent contractors, she dismissed their wrongful dismissal claim finding that by not signing the new agreement, they had "repudiated an essential term of the [PAGIC] Agreement by refusing to acknowledge LICC's right to amend the compensation plan as part of its managerial authority."4 She further found that the agents "knew that if they did not sign the new Agreement, the right to sell LICC products and their relationship with LICC would come to an end," 5 concluding that "such conduct on the part of the plaintiffs justified dismissal."6

Court of Appeal Decision

On behalf of a unanimous panel, Justice Juriansz held that Dunnet J. was correct in finding that the appellant agents were employees of LICC but that she failed to heed the policy considerations that underlie the termination of employment relationships. In support of this conclusion, Juriansz J. cited Jusitice MacPherson, who said in Ceccol v. Ontario Gymnastic Federation:7

In an important line of cases in recent years, the Supreme Court of Canada has discussed often, with genuine eloquence, the role work plays in a person's life, the imbalance in many employer-employee relationships and the desirability of interpreting legislation and the common law to provide a measure of protection to vulnerable employees.8

In overturning Dunnet J.'s decision, Juriansz J. held that LICC was obliged to provide its employees – the agents – with reasonable notice despite their refusal to sign the LICC agreement, that the agents were under no obligation to accept the LICC agreement and that their refusal could not be considered just cause for their dismissal. He concluded his reasons stating:

The vulnerability of employees who believe they may have been constructively dismissed and the difficulty of making the life-altering decisions they face must be recognized. In this context, it is understandable that such employees may wish to try to adjust to the new terms and conditions without affirming the employer's right to make these changes and before taking the radical step of advancing a constructive dismissal claim. Allowing employees reasonable time to assess the new terms before they are forced to take an irrevocable legal position not only addresses their vulnerability, but also promotes stability and harmonious relations in the workplace. For these reasons, I am of the view that the appellants had no obligation to acknowledge LICC’s right to change the compensation schedule, and that their failure to do so did not constitute a repudiation of their agreement with LICC.9

He recognized that in this case, the appellants continued to fulfill their duties under the employment contract and that their refusal to acknowledge LICC's right to amend the compensation schedule did not justify their dismissal. They were entitled to reasonable notice of termination.

As for LICC's reliance on the clause in the PAGIC Agreement permitting amendment tothe compensation plan, the Court of Appeal was satisfied that the proposed new agreements went well beyond what was contemplated under that clause.10

Significance of Belton

Justice Juriansz’s reasoning adds a new layer to the law of constructive dismissal. It grants an employee the opportunity to control his or her employment future by according the right to try out the new terms of an employment relationship arising out of an employer's unilateral decision. From an employer's perspective, the decision creates a period of limbo during the time when an employee is deciding whether or not to maintain the employment relationship in light of the changes. The decision does not identify the outer limits of what is a "reasonable time" for assessing the changed situation and this creates a measure of uncertainty for employers.

Following Belton, an employer will not have a clear idea of when an employee will be deemed to have acquiesced to the changes and will therefore no longer able to "quit" and successfully sue for constructive dismissal. While recent decisions, such as that of the Ontario Superior Court of Justice in Dixon v. Poly-Tech Creative Displays Inc.11 continue to pronounce on when an employee will be deemed to have acquiesced to unilateral changes to the employment contract, it is too early to anticipate how long a reasonable try out period will be since it has not yet been argued to rebut an allegation of acquiescence. At this point, an employer should be aware that there are grounds to argue that continuing to work after a unilateral change has been made to an employment contract does not indicate, as it did in Dixon, that the employee has acquiesced to the new terms and that the employer is therefore insulated against a constructive dismissal action.


1 [2004] O.J. No. 3358 (“Belton”).

2 See Farber v. Royal Trust, [1997] 1 S.C.R. 846 for a discussion of the basic principles of constructive dismissal.

3 Supra note 1 at para. 27.

4 Belton v. Liberty Insurance Company of Canada, [2002] O.J. No. 3687 at para. 73.

5 Ibid.

6 Ibid.

7 (2001), 55 O.R. (3d) 614 (C.A.)

8 Ibid at para. 47. See Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701; Machtinger v. HOJ Industries, [1992] 1 S.C.R. 986; Reference Re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313.

9 Supra note 1 at para. 26.

10 Ibid. at para 19.

11 [2004] O.J. No. 1739 ("Dixon")

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law