In Chapman v GPM Investment Management ( 2015 ONSC 6591) the CEO was found by the Court to be entitled to a bonus payment of $328,862 as per his contract. When he was not paid this bonus he claimed constructive dismissal. The Court held that the non payment of this bonus was not a constructive dismissal as it was one off and the situation would not arise again. Moreover as his total compensation was $1,173,239 , it was only a reduction of 28%. The judge emphasized that nothing had changed regarding his role and in the future the Employer was committed to honouring the contract.
In what I find is a surprising decision the Court of Appeal of Ontario ( Justices Miller, Hourigan and van Rensberg upheld the trial decision ( 2017 ONCA 227) .
Trial Decision :
So what is an employee to do when he is screwed by his employer out of a $328,862 payment? This is what Gunsolus J. had to say:
67 Mr. Chapman’s position that he was left in a position such that he would have had to sue his employer, and thus would be in the untenable position of having to leave his employment, does not persuade me that this was a constructive dismissal. In today’s modern commercial world, there were many other steps that Mr. Chapman could have considered. For example, mediation and/or arbitration could have been pursued. Mr. Chapman could have pursued the other investors in the EE Project as suggested by Mr. Johnson. Mr. Chapman was not put in an untenable position. He left his employment at a time when he had earned more than he ever had in his nine year history with the defendants. In addition to that, he received over $557,000.00 as a return on his personal investment in the EE Project. No reasonable person, in the shoes of Mr. Chapman, would consider themselves to have been constructively dismissed.
Court of Appeal Decision :
The Court of Appeal found that the trial judge made no overriding error in his reasoning. Of particular interest was what the Court said about the trial judges comments quoted above .
34] Furthermore, the trial judge considered all of the relevant surrounding circumstances in concluding that there were no other factors that could lead a reasonable person in the appellant’s position to conclude that GPM’s breach indicated an intention not to be bound by the memorandum of understanding.
[35] Against this, the appellant argues that the trial judge erred in not finding that he had been placed in the untenable position of having to either forego the $329,000 in bonus income and keep his job, or sue to recover the $329,000 and lose his job.
[36] The trial judge, however, found on the evidence that the appellant had options other than suing GPM on the one hand and foregoing the bonus on the other, including proposing arbitration and/or following up on Johnson’s suggestion that GPM might reconsider paying something towards a bonus if the other investors in the Ellerslie lands agreed.
[37] In my view, it was open to the trial judge to find that there were, on the facts of this case, dispute resolution alternatives that the appellant, a commercially sophisticated party, could have been expected to explore, and that a reasonable person in the appellant’s position would not have considered himself to have been constructively dismissed when the bonus on the sale of the Ellerslie lands was refused.
There is no indication in the judgement that there was an arbitration clause in the CEO’s employment agreement. As one cannot be forced into either mediation or arbitration absent a contractual provision, it is difficult to understand this logic. Furthermore suggesting that he pursue a remedy against other entities rather than the one with which he had a direct contractual relationship seems rather odd.
Why should an aggrieved employee have to chose an ADR process to resolve this issue? Surely they have the right ( absent a mandatory arbitration clause ) to pursue their remedy in Court ?
Does this now mean that that the law in Ontario is that is perfectly OK for an employee to sue their current employer over an allegation of unpaid wages and remain at work ?
Another option that would have been open to the Plaintiff was to file a complaint with the Ministry of Labour under the ESA for non-payment of wages, as bonuses are wages under the ESA, and there is no longer any monetary cap on recovery. Any attempt by the employer to terminate or discipline the employee for filing a claim would bring about further liability to the employer under the Reprisal section ( s.74) of the ESA.
The message from this case must be that quitting to obtain back wages is highly risky. You are much better off remaining in your job and commencing some sort of adjudication or litigation. According to this judgement, you can pursue legal remedies against your current employer and not have to worry about the problem of a conflict of interest.
Speaking for myself, if you screwed me out of $328,262, you sure would not want me working for you any more.
If the test for a constructive dismissal is based on the ” reasonable employee”, then I am pretty sure that if you polled 100 working people and asked them how they would feel is they were illegally denied $328,262 of their wages, virtually everyone of them would think that the employee would be amply justified in feeling they had no option but to quit, even if their boss promised that he was only going to screw them this one time.
What if the shoe were on the other foot and the employee stole $328,262 from his employer but, after being caught, returned it and promised never to do it again ?
Would the Court of Appeal say that this was not just cause for dismissal ?
How is wrongfully not paying me what I am owed any any different from me wrongfully taking what is yours?
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