Constructive Dismissal Damages and the Alberta Public Service Act

In the case of Twilley v. Alberta, a dismissed government employee challenged the applicability of a statutory pay-in-lieu-of-notice framework to constructive dismissal scenarios.

In reaching its decision, unfortunately, the Court of King's Bench relied on propositions from the Alberta Court of Appeal that are, inarguably, no longer good law. Not entirely the Court's fault; the unsuccessful Applicant relied on those same propositions.

Legal Background

In 2019, the newly-elected UCP government amended the Public Service Act to fix the amount of notice or pay in lieu of notice that dismissed employees would receive, by adding s.25.01.

(3)  Notwithstanding any right existing at common law, an employee who is terminated without cause is entitled to a period of notice of termination no greater than the following:

                             (a)    where the employee has less than one year of continuous service, 2 weeks;

                             (b)    where the employee has one or more years of continuous service, 4 weeks for every full year of continuous service up to a maximum of 78 weeks.

(4)  Subject to subsection (6), an employee who is terminated without cause may be provided severance pay, determined in accordance with subsection (5), in lieu of all or any portion of the period of notice of termination to which the employee is entitled under subsection (3).

The section also includes parameters on who this covers, how severance pay is calculated, and expressly overriding the operation of s.54 of the Employment Standards Code.

(There are also sections creating a quasi-mitigation offset, requiring repayment if the person gets another government job during the notional notice period. Which, in practice, just means that there's no reason for somebody to take another government job during that period.)

Notably, this does not impact unionized workers (which is most of the Provincial public service), and it doesn't affect Deputy Ministers or certain other excluded roles if they're "employed under a contract of employment that specifies the notice of termination, severance payments or combination thereof to which the employee is entitled on termination of employment". (I'll come back to that language later.)

It's also not a particularly miserly framework: For most dismissed employees under most circumstances, 4 weeks per completed year of service turns out to be reasonably close to (or sometimes even higher than) their common law entitlements.

There are three scenarios where it really shortchanges people, as compared to common law entitlements:

• Short service employees would get a lot less than common law entitlements would usually imply;
• At the other extreme, very long-service employees sometimes have common law entitlements that approach or exceed 24 months (104 weeks); and
• The common law notice doctrine can take into account other significant factors, like inducement from secure employment, or bridging service gaps, to give notice periods that are very disconnected from what this formula, considering only continuous length of service, will achieve.

In short, it's a framework that only applies in the first place to a certain number of workers, and even for those workers it's only going to have an adverse effect for a small number.

So it's not all that surprising that Twilley appears to be the first reported case interpreting its effect.

Twilley Issue

Leslie Twilley was employed for just over 5 years, the latter portion of which was in an Executive Director position, before taking the position that she was constructively dismissed. She argued that, because it's a constructive dismissal and not a 'not-for-cause' dismissal, s.25.01 doesn't apply.

Without knowing all the facts, I can't guess at what her common law reasonable notice period might have been. The 20 weeks she presumably gets under the PSA (if her constructive dismissal claim is otherwise made out) is almost certainly less than her common law entitlements would be. That said, mitigation is often a difficult issue in constructive dismissal cases, which one might argue the s.25.01 framework displaces.

So it's an interesting strategic decision, and not entirely a one-sided one, to argue that s.25.01 doesn't apply to constructive dismissal law.

Twilley's counsel argued that there's an inherent difference between a termination without cause and a constructive dismissal, because - citing paragraph 34 of Styles as authority - a termination without cause does not automatically imply a breach of contract, whereas a constructive dismissal does.

The Court's Decision

Justice Oviatt concluded that constructive dismissal is really just a type of not-for-cause dismissal.

That's fairly well-supported, in general. When a constructive dismissal is found, the employer is deemed to have dismissed the employee through its conduct. That's basically what constructive dismissal is, by definition.

She highlights that the entitlements flowing from a traditional termination without cause are the same as in a constructive dismissal case, citing the articulation from Styles that the breach of contract, in a conventional wrongful dismissal, is in failing to provide notice or pay in lieu thereof.

From a statutory interpretation standpoint, she rejected Twilley's argument that the provisions should be given a 'broad and generous' reading akin to similar provisions in employment standards legislation, because this isn't rights-conferring legislation, but legislation driven to controlling government expenditures; and she found that it's not logical or consistent to treat constructive dismissal as not being captured here.

Commentary

I could go either way on the ultimate issue, but I have concerns about the analysis, and about the drafting of s.25.01 more generally.

Stop Citing Styles

In a 2019 paper published in the Alberta Law Review, I highlighted that the language used in Styles is inconsistent with the broader principles of contract law. The ABCA, in Styles, thought that provision of pay in lieu was a mode of performance of the implied term of reasonable notice, and that no breach of contract occurred until and unless they failed to make that payment. I specifically argued that, in a footnote in paragraph 34, the ABCA had misstated an SCC authority, Sylvester, to justify declining to follow the then-recent Paquette decision in Ontario.

In Styles, and other cases like it, that distinction has the potential to matter.

Styles was heavily relied upon by the Nova Scotia Court of Appeal in Matthews v. Ocean Nutrition. When that case went to the Supreme Court, the SCC cited my paper and said:

[73] It also bears noting that the Court of Appeal of Alberta in Styles suggested that Paquette, one of the cases I rely on here, is premised upon an erroneous reading of this Court’s decision in Sylvester v. British Columbia. In Styles, the Court of Appeal noted that “[t]he common law implies a term of reasonable notice, or pay in lieu, in those circumstances. The payment in lieu is not ‘damages’ for a breach of the contract, but rather one component of the compensation provided for in the contract. If an employer fails to give proper notice or pay in lieu, the breach is in the failure to pay, not in the termination” (para. 34 (footnote omitted)). The Court of Appeal then observed that “[t]here are decisions from other jurisdictions that treat termination as a breach, but they do not reflect the law of Alberta: see for example [Paquette]. Paquette relies on the dictum in [Sylvester], at para. 1, but para. 15 of that decision confirms that it is the non-payment that is the breach, not the termination itself” (para. 34, fn. 1).

[74] On my reading, this Court in Sylvester confirmed that “[d]amages for wrongful dismissal are designed to compensate the employee for the breach by the employer of the implied term in the employment contract to provide reasonable notice of termination” (para. 15 [emphasis added by the SCC]). Authority elsewhere confirms this same idea: there is no such implied term of the contract to provide payment in lieu (see, e.g., Love v. Acuity Investment Management Inc. [Citations Omitted])

So here's a plea to employment lawyers and courts: stop relying on paragraph 34 of Styles. It was wrong to begin with, and its authority has been explicitly rejected by the Supreme Court of Canada.

That isn't necessarily a critical point in this decision - I don't think Justice Oviatt would have reached a different decision based on the articulation of wrongful dismissal from Matthews. But let's try to get it right.

Statutory Interpretation

Let me start by saying that the provision stating that s.25.01 of the PSA prevails over s.54 of the ESC is weird. Section 54 is an interpretive section of the ESC, informing the calculation of substantive entitlements to notice or termination pay created by s.55 - basically saying that length of service includes any periods of service not interrupted by more than 90 days.

Section 25.01 uses a different method, presumably. Less explicit, but it just says "continuous". But that would never conflict with s.54, because s.54 doesn't create any entitlements. It would conflict with s.55, if anything.

So here's a hypothetical scenario: I work for 10 years; I quit, but two weeks later the employer pulls me back; then I work for another 9 months, before dismissing me on a not-for-cause basis. Under the ESC, my s.55 minimums are 8 weeks. Under the PSA, my maximum entitlement is 2 weeks.

Does the PSA override the ESC? That seems to be the intention, even if it's done in a way that's deeply incoherent.

But remember, the ESC does get a broad and generous purposive interpretation, and statutory provisions that derogate from the protections of rights-conferring legislation should be read narrowly. These PSA provisions derogate from common law rights in much the same way as they do from ESC rights.

Is "Not For Cause" a Specific Category?

I've commented before on the 'repudiation' case law out of some Provinces finding that employers aren't entitled to rely on their 'not-for-cause' termination clauses if they purported to dismiss for just cause or otherwise didn't honour those clauses.

I don't like those cases, because they break with some basic precepts of contract damages, but the analysis could be impactful here.

Historically, I've never really thought of "not for cause" to mean anything other than the absence of just cause. But there's a subtext to some of these decisions that suggests that "not for cause" is specifically created as a category, distinct from various other causes (only one of which is 'just cause') - an analysis to which I am sympathetic.

And there's statutory support for this, too. The ESC has a whole pile of different categories of dismissals that create exemptions from termination notice or pay:

• Just cause
• Employed for 90 days or less
• End of a fixed term contract
• Laid off after refusing an offer by the employer of reasonable alternative work
• Employee refused work made available through a seniority system
• Not provided with work by reason of a strike or lockout (note: this wouldn't impact striking workers, but non-unionized workers at the same workplace where a strike is going on)
• Termination of employment relationships where the employee is able to elect whether to work for temporary periods on request (think 'series of short term contracts' or casual)
• Frustration
• Termination at the end of a season, for seasonal work

The general entitlement to notice or termination pay isn't just "not for cause"; it's "anything other than any of those categories". (Also subject to exempt categories of workers.) Many of these would be characterized, on the right facts, as a 'constructive dismissal' - yielding common law remedies, but not employment standards entitlements. But not all of them.

And while it's true that constructive dismissal yields similar remedies to termination on a not-for-cause basis, that's because the employee's contractual entitlement is to reasonable notice, and they didn't receive that. So it's not incoherent (and very well aligned with extraprovincial authority) to suggest that the "deemed" termination flowing from a constructive dismissal - while yielding the same remedies because it deprived the employee of the same entitlement - is in a different category than a deliberate not-for-cause termination.

A "Comprehensive Scheme"?

Justice Oviatt concluded that s.25.01 creates a "comprehensive scheme", with one of its objectives being "predictability" surrounding termination pay. On the plain language of the provision, I have my doubts about that interpretation, because the framework purports to operate "notwithstanding" other rights the employee may have. The plain language of s.25.01(3) seems to create a 'cap' of pre-existing rights - in other words, that you need to establish a separate cause of action, and s.25.01(3) simply limits your damages.

However, the language of s.25.01(4) pretty directly implies that entitlements arise under s.25.01(3). In this sense, the language of these two subsections is in conflict.

The rights-conferring interpretation is given further credence by the fact that subsection 4 creates a 'pay in lieu' option. At law, this means that - subject to the explicit partial mitigation language actually built into the section - money owing by virtue of subsection 4 is not actually subject to mitigation. Meaning that, if you're entitled to 78 weeks, and you get a new (private sector) job paying the same money two weeks after the dismissal, you still get that whole year and a half worth of entitlements.

If subsection 3 actually does create entitlements, and Justice Oviatt's analysis is otherwise correct, it has other implications, actually creating additional entitlements in various scenarios. There are factual formulations where 4 weeks per year of service turns out to be pretty generous. In practice, I'd generally expect the courts to look to that statutory cap as informing reasonable notice, in cases where it applies - in other words, you're unlikely to see the government making a persuasive argument for much less than the cap. But it's theoretically possible.

More importantly, however, look back at the list of employment standards exceptions that are not 'just cause' cases. Those scenarios have various different treatments at common law, but I think the clearest demonstration of the issue here is the "end of a fixed term contract" case, where the common law provides for no entitlements at all.

This is where a very serious practical question coalesces: Does s.25.01 create an entitlement for employees whose employment is terminated because their fixed term contract ended?

On Justice Oviatt's interpretation, the answer to that has to be 'yes'. Which is kind of an absurd outcome, and one the courts will generally try to avoid. There are two ways around this:

1. Treat s.25.01(3) as only creating a cap, and not establishing new rights (taking this squarely out of any sort of "comprehensive scheme" analysis); or
2. Treat a 'not-for-cause termination' as a discrete category, so that it's not triggered by terminations such as 'end of a fixed term contract' or 'probationary dismissal', etc.

On either approach, it pulls out the rug from the outcome in this case.

Other Issues With s.25.01

More broadly, the drafters of s.25.01 just didn't seem to understand the contractual nature of wrongful dismissal law. There are a few ways where this issue manifests.

Firstly, on its plain language - despite Justice Oviatt's remarks about it being a "comprehensive scheme" - it doesn't displace the entitlement to common law notice. It operates more as a 'limitation of liability' clause (another factor that should attract a narrower reading) while fundamentally leaving intact the underlying right to reasonable notice. (This differs from the Ontario/BC 'repudiation' cases, which deal with contract clauses that expressly displace the implied right to common law reasonable notice.)

This supports Twilley's position, in the sense that she still has a substantive implied contractual right to reasonable notice, so the argument goes that s.25.01 limits the government's obligations in the course of specified processes.

So, all in all, I think there's a compelling argument there.

Secondly, as noted, the way it deals with 'pay in lieu' creates analytical problems, because, while it caps notice obligations otherwise owing, those notice obligations don't typically come with a 'pay in lieu' option, so it's really unclear how this framework dovetails with a Matthews analysis. (That said, this one's a bit more understandable, because this language was drafted at time when Styles was good law.)

Thirdly, the exemption for certain classes of employees is drafted in a really silly way. Notably, I don't know if Twilley would have been in one of those classes of employees - it's Deputy Ministers and other designated positions that are excluded from classification plans, and I don't know the scope of those exclusions. However, there are two criteria for that non-application of these provisions - being in one of those excluded positions, and being "employed under a contract of employment that specifies the notice of termination, severance payments or combination thereof to which the employee is entitled on termination of employment."

While I have no doubt that whomever drafted this intended it to capture only express contractual language doing that, nearly every employee in Alberta has, at minimum, an implied contractual term specifying notice of termination entitlements.

Let's be really clear about this: All employees, by definition, have contracts, whether written or not, and basically all of those contracts have terms in them, express or implied, delineating notice entitlements.

There's a conceivable argument that, to trigger that language, a clause would need all the constituent parts noted (notice, pay in lieu of notice, and a hybrid option), but this doesn't pass the smell test on legislative intent, particularly when we note that this language was crafted before Matthews and after Styles, at a time when Alberta law didn't recognize or care about a distinction between 'damages for failure to give notice' versus 'a contractual entitlement to pay in lieu'.

In other words, on the language of the statute as drafted, s.25.01(2)(b)(ii) has basically no effect on anything, because it's a criterion that any affected employee would satisfy.

*****

The author is an in-house lawyer in Alberta. Views are the author's alone. This article does not contain legal advice, but general legal information. If you have a legal issue, consult a lawyer.