Ending vehicle benefit a constructive dismissal

An Ontario company constructively dismissed a worker when it stopped paying for a vehicle and its maintenance that had been part of the worker’s agreement to join the company, the Ontario Superior Court of Justice has ruled.

The 57-year-old worker was a gas fitter specialist and heating, ventilation and air conditioning (HVAC) technician for Camus Hydronics, a manufacturer of copper tube and stainless steel boilers for residential, commercial, and industrial applications based in Mississauga, Ont. Hired by Camus in 2014, the worker had been employed in the industry since 1992.

Before the worker joined Camus, the company’s principals had tried to recruit him twice. He agreed to join the company after they promised to fully pay for a vehicle and its operating costs, including the use of a toll highway. This was important to the worker because he lived in Oshawa, Ont., about 80 kilometres from the company’s facility.

The worker signed an employment agreement for the position of sales and service support. The vehicle benefit was not mentioned in the agreement, but Camus paid for it and its operating costs for seven years, even though the worker used it primarily for personal use along with commuting to and from work.

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Company-provided vehicle needed replacement

In 2021, the worker informed Camus that his vehicle needed to be replaced, as he had driven it more than 400,000 kilometres. However, on March 15, Camus told the worker that the company would not be replacing the vehicle.

The worker suggested that if he purchased a new vehicle himself, the company could continue to cover the costs of the license plates and insurance. He also asked if he should return the gas credit card and transponder for the toll highway. On March 30, the company said that it would provide the insurance, tolls, and gas card for one additional month “to allow for a transition.”

However, on April 12, the worker emailed the director of customer experience for Camus’ parent company – which had acquired Camus in 2016 - that the significant changes that the company was proposing amounted to a “large pay cut” that he couldn’t afford. He said that the cost of a new truck similar to what he had been driving would be about $55,000 plus $32,000 annual operating costs. This would amount to approximately a 30-per-cent pay cut, he said – his base salary was $103,000 and his benefits were worth another $9,000.

The company responded that it would stop paying for the truck, tolls, fuel, and insurance on May 1. It offered the opportunity for the worker to purchase the truck, but if he declined he would have to return the keys.

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Resigned from employment

On April 29, the worker’s lawyer wrote to Camus advising that the company’s refusal to pay for a vehicle and its maintenance amounted to a reduction in his compensation of more than 30 per cent, which was constructive dismissal. The worker resigned from his employment effective May 14.

On May 17, Camus’ HR department sent an email announcement to employees advising that the worker was no longer a team member at Camus.

Now that the worker was unemployed, he and his partner could not afford the two houses they had, so they sold the one in Oshawa and moved into their other house in Omemee, Ont., about 70 kilometres northeast of Oshawa.

The worker sued for constructive dismissal, claiming damages for 12 months’ pay in lieu of notice.

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Offer of re-employment

On June 18, 17 days after the worker commenced his legal action, Camus offered him his old job back with a fully paid vehicle for one year. The worker declined, since he now lived 150 kilometres away and the commute would be 90 minutes to two hours each way. The worker also couldn’t see himself “walking back into the office and face uncomfortable questions from all those who had been told he was no longer employed.”

In July, the worker started looking for similar employment in the area of his new home and applied for 13 jobs, but he didn’t receive any interviews or offers.

The court agreed with the worker that the vehicle benefit was worth about $30,000 per year, which was a significant change in his overall compensation. Camus’ decision to end the benefit was a unilateral one that altered an essential term of the worker’s employment, said the court, finding that it constituted constructive dismissal.

The court recognized that Camus likely had valid business reasons for the decision, but I couldn’t make such a significant change to the worker’s benefits package without providing reasonable notice. However, it only gave the worker one month’s notice, the court said.

The court also noted that the termination clause in the worker’s employment contract stipulated that he would be entitled “only to notice of termination, termination pay and/or severance pay as required by the Ontario Employment Standards Act [ESA].” The use of the word “only” purported to restrict the employer’s obligation to termination pay and not benefits, which was contrary to the ESA, said the court.

An employer had no right to temporarily lay off a long-time employee, but the employee’s refusal of a reasonable re-employment offer was a failure to mitigate, an Ontario court ruled.

Ambiguity in termination clause

The court also found that Camus was required to pay the worker severance pay under the ESA because he had worked at Camus for more than five years. However, the use of “and/or” in the termination clause created ambiguity that suggested that the employer would only pay either termination pay or severance pay – such an ambiguity voided the termination clause, the court said.

As a result, the worker was entitled to common law reasonable notice. Given his age of 55 at the time of termination, his qualifications as a gas fitter, and more than 30 years in the industry, the factors pointed towards a longer notice period, the court said. However, it also found that it was more difficult to find new employment in the less-populated area to which the worker moved, said the court in determining that 10 months’ notice was appropriate.

The court found that the worker would have been obliged to accept the offer of re-employment had he not moved away – a reasonable person would not have found the situation embarrassing since the only reason the employment ended was over the vehicle costs - but it was unreasonable to expect him to commute that distance and he moved before the offer was made.

However, the worker’s decision to move should be factored in the mitigation analysis, said the court. The worker had no reason to remain closer to Camus once he was dismissed, but a reasonable person would not move away from the Greater Toronto Area if intending to look for work in the HVAC field, said the court in determining that the damages for reasonable notice should be reduced to seven months.

Camus was ordered to pay the worker damages equal to seven months’ salary, benefits, and vehicle costs, minus the six weeks’ notice between the March 30, 201, notification that his vehicle coverage would end and his resignation on May 14 – a total of $56,025. See Quesnelle v. Camus Hydronics Ltd., 2022 ONSC 6156.