An Ontario decision recently decided that General Motors of Canada Ltd (“GM”) did not commit a breach of an employment contract with a former employee. The Court of Appeal stated that the absence of evidence indicating a constructive dismissal or a failure to mitigate an employee’s intolerable circumstances will not establish an intention to fundamentally breach an employment agreement.

In General Motors of Canada Ltd. v Johnson (2013) ONCA 502, Johnson sued for damages for breach of his employment contract by claiming that he was constructively dismissed due to GM’s failure to provide a racism-free work environment. The respondent based his claim on the appellant’s lack of disciplinary measures during three separate internal investigations, where one included a third party employee refusing to train with Johnson. Johnson claimed the third party employee refused to train with him because of the colour of his skin. In order to establish a wrongful dismissal, the plaintiff must establish on an objective basis that a reasonable person would have felt that the essential terms of the employment contract were substantially changed and that the offending conduct must be persistent and repeated unless a stand-alone incident is enough to taint the entire workplace.

The Court of Appeal reversed the trial judge’s decision after finding no direct evidence of racism towards Johnson by anyone at GM, where the third party employee’s reasons for missing the training session were found to be sincere and not motivated by racism. The Court also stated in obiter that if a party to a contract (and in this case, the plaintiff), demonstrates an intention to no longer be bound by it, that party is committing a fundamental breach which results in the contract’s termination.

Key Take-Away

To avoid a potential wrongful dismissal claim, an employer may consider entering into a mutual release with the employee upon termination of the employment agreement. This is a condition that can be included in an employment agreement for termination.

See Clausehound’s standard employment agreements here!

 

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