CHAUDHRI: Employee proves constructive dismissal after COVID layoff

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Michael Chalmers, vice-president of Airways Transit Service Limited, was placed on a layoff from the company at the onset of the COVID pandemic in March 2020.

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In June of that same year, the company recalled its management team back to work with the exclusion of Chalmers. He was never recalled. He sued Airways Transit seeking damages for constructive dismissal in 2021 and his case was heard in 2023.

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Chalmers joined Airways Transit in 1992 and had 28 years of service at the time he alleged he was constructively dismissed. As vice-president, he ran the day-to-day operations of the company that employed 125 to 150 people.

There were only two employees more senior than Chalmers in the organization, the CEO and CFO. He was the highest paid employee with an annual salary of $116,532, a $6,000 annual pension contribution and executive group benefits.

Even after being laid off, Chalmers and a few other managers continued to work, unpaid from March to June 2020. Chalmers gave evidence that he did so to support the company because of his loyalty to it.

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On June 25, 2020, Chalmers learned many positions had been returned to full-time work at Airways Transit. He made multiple inquiries about his own return and continued to perform some functions that supported the company’s interests. The court found many of his inquiries went unanswered by the company’s CEO and CFO.

The court was left to decide if Airways Transit unilaterally changed Chalmers’ contract to determine if he was constructively dismissed.

The court found Chalmers was laid off and expected to work for a period of time without pay. When he claimed constructive dismissal, Airways Transit failed to pay him his statutory minimums after the layoff and denied that it terminated him at all. Airways Transit claimed it simply did not have the revenue to support returning Chalmers to work.

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The court found that Chalmers indeed was constructively dismissed when he was laid off in 2020 without pay.

“Given that a reduction in an employee’s pay and/or responsibilities can constitute constructive dismissal, clearly an indefinite layoff with no pay can also constitute constructive dismissal,” the court stated.

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Chalmers was awarded 25 months of reasonable notice and $30,000 in punitive damages.

The court stated: Employees depend on employment not only for their financial survival but also for a sense of self-worth. Conduct of the employer that negatively impacts on those two essential elements warrants condemnation and punishment.

While Airways may have had a legitimate financial crisis, as many employers do from time to time, the court will never lessen the burden on employers to meet obligations owed to employees. Financial hardship is no excuse for the arbitrary stripping down of roles or reduction of compensation plans.

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This case is a topical one. Employment has been volatile in many industries, which has resulted in the restructuring of roles and responsibilities for many employees. Some employees have been stripped of responsibilities, roles, compensation and perks. In some cases, these changes are fundamental and give rise to constructive dismissal claims.

Yet many employees elect to acquiesce to these sometimes fundamental changes. Perhaps this case will lead some to reconsider.

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The content of this article is general information only and is not legal advice.

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