April 14, 2016
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A former manager at an Ottawa McDonald’s franchise was recently successful in her wrongful dismissal claim against the company, which resulted from her constructive dismissal after 20 years of service. The case, Brake v. PJ-M2R Restaurant Inc., provides a clear example of an employer that refused to take the necessary steps to support the performance of its employee, but instead chose to engage in an arbitrary and unfair performance management scheme where the employee was set up to fail from the outset. The decision provides a cautionary tale for employers, and demonstrates the importance of approaching the employment contract in good faith.

The case involved a manager of a McDonald’s franchise, Esther Brake, who was employed with the franchise for 20 years. She was previously responsible for two of the franchise’s restaurants in Kanata – one full-service restaurant and one smaller location within a Wal-Mart. Throughout her employment, she received generally positive performance reviews. In November 2011, however, Ms. Brake’s fortunes began to change when she received her first negative performance review. She was shocked, but was never given any indication that her employment was in jeopardy. Ms. Brake was also told then that she would be transferred to the Wal-Mart location, and would manage it exclusively. That restaurant was significantly smaller than the full-service restaurant, with fewer sales and far fewer staff. The location was more difficult to manage, and experienced significant staff turnover. To make matters worse, the location’s performance had been trending badly, and was ranked among the worst McDonald’s locations in Canada.

Nonetheless, Ms. Brake worked tirelessly to turn the restaurant’s performance around. In April 2012, however, she received another unfavourable performance review and was placed in McDonald’s progressive discipline program. The thresholds that were set for her performance were arbitrary and unfair, and were more difficult than the standards set for her over the course of her employment. In the end, remarkably, Ms. Brake achieved the unreasonable goals set for her. Yet, in August 2012, she was still told that she had failed, and advised that she had to “take a demotion or go”. The demotion would require her to report to employees whom she had trained and supervised, and that were much younger and less experienced. Ms. Brake refused the demotion and left, never to return.

At trial, the franchise alleged that just cause for termination existed due to Ms. Brake’s performance “failings”. Ms. Brake argued that she had been constructively dismissed as a result of the demotion.

Proving that just cause exists for termination due to poor performance provides a tremendous hurdle for any employer. The employer must demonstrate that the employee suffered from real incompetence – gross incompetence. General dissatisfaction with performance is not enough. In this case, the evidence fell far short, but rather reflected an employee with an overall favourable performance record. In fact, her recent performance appeared to be trending upward at an extraordinary degree. She was not given any clear and reasonable opportunity to correct any alleged issues, and was set up to fail from the outset. As the court found, “Not even the fact that she did ultimately manage to meet the Defendant’s heightened expectations could save her in the end.”

The court also considered whether Ms. Brake was constructively dismissed through the demotion. Where an employer makes a substantial or fundamental change to an employee’s employment contract, and the employee does not agree to that change and leaves the job, the employee has not resigned but has been dismissed. A demotion can, in many cases, amount to a substantial change to an employee’s contract. In this case, the demotion would have been seriously embarrassing to Ms. Brake, and she was not required to accept it. She was accordingly constructively dismissed.

Ms. Brake was awarded 20 months’ reasonable notice of her dismissal. Interestingly, despite the fact that she had accepted work during that notice period, the court did not offset the amounts to be paid by her mitigation income. Typically, an employer is permitted to offset the amounts owed to the employee during the notice period, dollar-for-dollar, by any new income earned by the employee during that period. In this case, Ms. Brake had picked up non-managerial work as a cashier. The court determined that her ability to find that type of employment did not “take away from the loss she suffered from being dismissed without cause” since the work was “substantially inferior” and accordingly did not “diminish the loss” of her manager’s position at McDonald’s.

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