Decision on Constructive Dismissal a Game Breaker

The Workplace Safety and Insurance Appeals Tribunal’s recent decision in Hospitality Fallsview Holdings Inc. v. Morningstar 2019 ONWSIAT 2324, may signal a new jurisdictional regime around claims of wrongful dismissal premised on workplace harassment causing chronic mental stress.

“The ruling precludes civil actions based on chronic mental stress due to harassment in the workplace on the basis that chronic mental stress amounts to a workplace ‘injury,’” said Shana French of Sherrard Kuzz LLP in Toronto, co-counsel for Hospitality with her colleague Daryl Seupersad.

The case arose when Morningstar resigned her employment as a supervisor at Hospitality. In a subsequent civil suit alleging constructive dismissal, Morningstar claimed that she “was forced to resign from her position … due to the harassment, bullying and abuse she endured during the course of her employment and the resulting mental distress she experienced and continues to experience.” She further pleaded that her claim “relates to the harassment and bullying that [she] experienced as a result of a toxic work environment created by …employees and management.”

In her suit, Morningstar sought damages for constructive dismissal and the tort of harassment as well as punitive, aggravated and moral damages.

The Workplace Safety and Insurance Act, 1997 (WSIA), however, bars civil action against covered employers when a worker is entitled to benefits under the plan “by reason of an accident happening to the worker or an occupational disease contracted by the worker while in the employment of the employer.”

In 2018, the WSIA was amended to extend benefit entitlement to cases of chronic and traumatic mental stress arising in the course of employment.

Hospitality applied to the Appeals Tribunal for a determination that Morningstar’s right to action was barred because her civil claims were essentially allegations of chronic mental stress that fell under the WSIA, thus nullifying her right of action for constructive dismissal and damages, including aggravated, moral and punitive damages arising from the alleged stress.

Morningstar’s lawyer, Zachary Pringle of Scarfone Hawkins LLP in Hamilton, countered that his client’s causes of actions were not inextricably linked to a work accident. He argued that Morningstar would still have a claim for constructive dismissal even if she had not suffered mental stress.

The Appeals Tribunal sided with the employer.

“… her claim falls within the jurisdiction of the WSIA and thus her right to bring a civil action against the employer is barred by statute in these circumstances,” wrote vice-chair Joanna Smith.

While tribunal jurisprudence generally preserved the right to bring an action for wrongful dismissal, this was not so in the “exceptional case” where the wrongful dismissal claim was “inextricably linked to the work injury.”

As Smith saw it, that was the case here.

“The Respondent’s action against the Applicant is not for wrongful dismissal in the usual sense, but rather is for constructive dismissal, meaning her employment was effectively terminated by the harassing and bullying conduct of co-workers and management which caused her mental distress to such a degree that she was forced to take sick leave and ultimately to resign …” she wrote. “I find that these facts, if proven, are inextricably linked to a claim for injury governed by the WSIA …”

The decision, French points out, considerably narrows the scope of liability for employers in these types of cases.

“We went from potential liability of $250,000 based on claims of constructive dismissal and tort to a situation where the employee was limited only to her statutory entitlements under the WSIA,” she said. “Ultimately, the decision removes a lot of risk, and in that sense it’s a game breaker.”

Still, the case doesn’t mean that civil suits for wrongful dismissal are no longer available to employees.

“There are situations where wrongful and constructive dismissal will fall outside the scope of this case, but not when the termination is triggered by an injury that falls within the scope of the WSIA,” French said.

For his part, Pringle agreed that the decision as it stands is a game breaker.

Except the game is not yet over.

“We’re preparing an application for reconsideration,” the lawyer said.

As Pringle sees it, Smith erred in treating the alleged harassment as a breach of an implied term of the employment agreement.

“That’s not how the courts have analyzed constructive dismissal,” he said.

According to Pringle, jurisprudence from the Supreme Court of Canada mandates courts to look at all the actions and inactions of the employer with the benefit of hindsight and determine whether an objectively reasonable bystander would conclude that the conduct of the employer amounted to a repudiation of the contract of employment.

“There’s a substantial difference between looking at all of the conduct and simply relying on a breach of an implied term of the contract in determining whether constructive dismissal has occurred,” Pringle said. “As well, this appears to be the only decision that has gone this way at the Appeals Tribunal in the last 20 years.”

Still, the lawyer is well aware that reconsideration applications at the Appeal Tribunal are an uphill battle.

“To succeed in obtaining a reconsideration hearing, we have to show a serious error of law,” he said. “And even if the hearing goes ahead, it returns to the original adjudicator — which also makes things a little more difficult.”

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