On February 1, 2024, the Superior Court of Québec held that a senior executive with 35 years of service, who had been constructively dismissed, was not entitled to any termination indemnity because he had declined the new position that the employer wanted to assign to him. In this article, Eveline Poirier and Antoine Métayer take a closer look at Poulin c. Hydro-Québec, 2024 QCCS 280 to explore the subtleties of the reasonable person test applied by the Court.
Summary of decision
Mr. Bernard Poulin joined Hydro-Québec as a junior engineer in November 1985 and reached senior manager status in June 2012.
As of July 2018, Mr. Poulin assumed the position of Vice President - Planning, Strategies and Expertise. Mr. Poulin was pleased with this position as it involved more strategic responsibilities. In August 2019, Mr. Poulin was entrusted with a highly strategic assignment that was initially scheduled to end in December 2019, but would ultimately be extended to March 2020. For the duration of this assignment, another employee, Mr. Roger Gosselin, filled in for Mr. Poulin in his original position on an interim basis. Mr. Gosselin was one of Mr. Poulin's subordinates and it was the latter who recommended him to hold Mr. Poulin’s position during his temporary assignment.
In March 2020, Mr. Poulin's assignment came to an end and he prepared to return to his position. Mr. Poulin was then advised that Mr. Gosselin was reluctant to return to his former position as Director, and discussions took place to try to accommodate Mr. Gosselin's preferences while reducing any impact on Mr. Poulin. At the same time, Hydro-Québec was undertaking larger organizational changes of which Mr. Poulin was unaware.
On June 12, 2020, Mr. Poulin was informed that all Vice President positions are being abolished and that Mr. Gosselin would retain the position of Senior Director - Planning, Strategies and Expertise. For his part, Mr. Poulin would be assigned to the position of Senior Director - Production and Maintenance, a position he described as purely operational, in which all his strategic duties would be taken away. Hydro-Québec insisted that the change in Mr. Poulin's position would not entail any change to his remuneration or other working conditions. Mr. Poulin informed Hydro-Québec that he did not agree to be reassigned to this position. Hydro-Québec then offered him the following options: either he accepts the position to which he is assigned; or Hydro-Québec will consider that he resigned. Mr. Poulin did not accept the position and in December 2020, initiated legal proceedings against his employer.
More specifically, Mr. Poulin claimed that he was the victim of a constructive dismissal in the summer of 2020, at 59 years of age and after 35 years of service, and is therefore entitled to an indemnity of $836,365, representing 24 months of remuneration.
Hydro-Québec argued instead that Mr. Poulin implicitly resigned from his position by refusing the reassignment. Subsidiarily, Hydro-Québec argued that Mr. Poulin did not mitigate his damages by refusing to accept the position to which he was assigned.
The reasonable person test in the constructive dismissal analysis
To determine whether there was constructive dismissal, the Court relied on judgements rendered by the Supreme Court of Canada. The analysis must be conducted from an objective perspective and the Court must determine whether, in light of the information available to the employee at the time of the events, a reasonable person would have determined that there was a substantial and unilateral modification of an essential term of the employment agreement. The employee has the burden of proving constructive dismissal.
Considering that Mr. Poulin was reassigned from a Vice President position, with purely strategic duties, to a Senior Director position with far fewer said duties, the Superior Court concluded that Mr. Poulin had been constructively dismissed, even though he retained the same salary, benefits, and pension fund. The Court held in clear terms that the essential conditions of employment are not limited to financial aspects, but also include the nature of the tasks performed.
Mr. Poulin was thus entitled to receive, in accordance with section 2092 of the Civil Code of Quebec (“C.C.Q."), reasonable notice of termination of employment as a result of this constructive dismissal. Hydro-Québec was entitled to give Mr. Poulin reasonable notice, either in time (by giving working notice) or as a payment in lieu thereof. Mr. Poulin's right to reasonable notice of termination of employment was also subject to his obligation to mitigate his damages.
The reasonable person test in the damage minimization analysis
The Court continued its analysis to determine whether Mr. Poulin had failed to respect his obligation to mitigate his damages under article 1479 of the C.C.Q. This time, it is the employer's turn to prove that the employee did not mitigate his damages.
At this stage of the analysis, the Court must determine whether a reasonable person, placed under the same circumstances, would have accepted the employer's offer in lieu of reasonable notice.
To do so, the Court analyzed the following seven (7) criteria, established by the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (“Evans”):
- Has the salary offered changed?
- Are working conditions significantly different?
- Is work degrading?
- Are personal relationships acrimonious?
- What is the history and nature of the position?
- Has the employee taken legal action or not?
- Was the offer made to the employee while he was still working for the employer, or only after the employee had left?
It is important to note that in Evans, the employer offered the employee the opportunity to return to the same position that he held prior to his termination and therefore, the employee would serve a working notice period rather than receive compensation in lieu of notice. In the present case, Mr. Poulin's position still existed, but he had been offered another position instead.
In this instance, by answering each of these questions, the Court established that they weigh in favor of acceptance of the offer by a reasonable person. In answering the second question, the Court determined that, apart from the modification of duties, the working conditions remained the same overall. Thus, according to the reasonable person test, the threshold of substantial change in working conditions required to liberate an employee from the obligation to accept the modified role as mitigation of his damages, is higher than the threshold for establishing constructive dismissal in the first place.
Finally, the Court also mentioned that Mr. Poulin should have been more flexible in his consideration of Hydro-Québec's offer to minimize his damages, given the uncertain circumstances of the Covid-19 pandemic and the fact that his reassignment was part of a global reorganization at Hydro-Québec.
The Court’s conclusion
The Court concluded that Mr. Poulin had been constructively dismissed, but that he failed to mitigate his damages by refusing the position to which he was assigned. As a result, Mr. Poulin's claim for payment in lieu of reasonable notice of termination of employment was rejected. It follows from the Court's analysis that a reasonable person would have concluded that the position offered was constructive dismissal, but they would nonetheless have found the demotion sufficiently reasonable to be accepted in order to mitigate damages.
This decision is of particular interest to employers faced with a reorganization that may have an impact on their employees' terms and conditions of employment.
For more information and insights, visit Stikeman Elliott’s Knowledge Hub.
A notice of appeal was filed in this case on February 27, 2024. We will be following this case closely.
DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.
***
Eveline Poirier is a partner in the Employment & Labour Group. She routinely provides clients with strategic advice to reduce risks for their businesses and resolve disputes. She possesses a vast experience in conducting litigation on a broad range of employment and labour matters before both provincial and federal arbitrators, boards, tribunals, and courts. Her expertise includes all aspects of individual and collective labour relations, dismissal cases, psychological harassment complaints, the application of non-competition and other restrictive clauses in employment contracts, employee incentive programs, pension plan issues, occupational health and safety matters, and human rights complaints.
***
Antoine Métayer is an associate in the Employment & Labour Group and a member of the Québec Bar. Antoine joined Stikeman Elliott as a student in 2019. During his university studies in law in a co-op program, Antoine worked as a student at Stikeman Elliott and completed a project management internship for a construction company.