Employee not constructively dismissed after employer hired a replacement

An employee argued that he was constructively dismissed when another individual was hired to replace him as president of a newly amalgamated division at the company.

Facts

The Carras v. Altus Group Limited, 2020 ONSC 2936 decision features a circumstance where the plaintiff, the owner of RealNet Canada Inc., sold his business to Altus Group Limited and agreed to stay on as president of the business segment under new ownership. The plaintiff agreed to a salary reduction and was promised stock options if he stayed with the company for 3 years either as an employee or consultant or if he was dismissed without cause before the 3 years expired.

Nearly one year after the sale closed, Altus decided to amalgamate the RealNet division with three other divisions. The plaintiff showed interest in leading the new division, but the company did not think he would be a good fit. Instead they decided the plaintiff should serve a market facing role. A few months later a new individual was hired to lead the newly amalgamated division. The new hire took over the duties of the plaintiff. The plaintiff then proposed a new consulting arrangement offering a reduction in work hours and a reduction in remuneration which Altus accepted. Nevertheless, the written agreement was never finalized, and stock options were not discussed.

While consulting the plaintiff started several businesses. In August 2016, after a combined two years of employment and consulting, the plaintiff sat down for a farewell drink with Altus’ President of Research. Both parties understood that the consulting agreement was ending – the plaintiff’s email and phone access was disabled, consulting fee payments were no-longer made, and the plaintiff stopped coming into the office.

One year later, in August 2017, the plaintiff contacted Altus concerning his stock options. In-house counsel informed him he was not entitled to exercise his options because he was not employed or consulting for the required three-year period. The plaintiff subsequently filed a lawsuit claiming he was constructively dismissed in 2015 when the plaintiff’s replacement was hired by Altus.

Disposition

Myers J disagreed with the plaintiff and found that the employer did not act as if the agreement was at an end or as if the employer were not bound by the agreement when hiring the replacement. In fact, the company accepted the plaintiff’s new consulting arrangement. The change in status was by mutual agreement between the plaintiff and the company.

In addition, even if there was no mutual agreement, Myers J found that the plaintiff acquiesced to the changes. He continue to work under the new terms for an entire year, continued to be paid and never communicated to the employer that he believe it had repudiated the employment agreement.

Based on the actions of both the company and the plaintiff, Myers J found that the relationship ended voluntarily in August 2016. The plaintiff did not work the full three years, nor was he dismissed, and therefore did not meet the contractual obligation required to exercise his stock options.

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