Sunday, 5 September 2021

Employees Can Sue for Constructive Dismissal Caused by Chronic Mental Stress: ON Div Ct

Can an employee sue for constructive dismissal if the cause of the employment relationship break down is that the employee was subjected to chronic workplace harassment resulting in injuries otherwise compensable under the WSIB regime?

In a well-reasoned, no-nonsense decision, Morningstar v. WSIAT, 2021 ONSC 5576 (CanLII), the Ontario Divisional Court (Sachs, Backhouse and Kurke JJ.) overturned two earlier decisions of Ontario’s Workplace Safety and Insurance Appeals Tribunal (the “WSIAT”), about which I blogged in my post Employees Cannot Sue for Constructive Dismissal Caused by Chronic Mental Stress: WSIAT, and held that one can.

Facts

Judith Morningstar’s case is a tragic one, about which much has been written in mainstream media. For example, on October 25, 2020, the Toronto Star published a story about Ms Morningstar’s case titled, This cancer survivor was harassed, taunted and sprayed with Lysol by colleagues. But a tribunal says she can’t sue her workplace. As that article recounts:

After surviving uterine cancer, the last thing Fallsview Hotel housekeeper Jan Morningstar expected was for her illness’s symptoms to be weaponized against her at work.

Yet that is exactly what she says happened in a years-long harassment ordeal in which she was relentlessly taunted for “having an unpleasant odour,” sprayed with Lysol by her co-workers, teased for supposed incontinence, and asked by managers if she had “considered using feminine products such as douches, sprays, pads or baby powder.”

Ms. Morningstar resigned her position with Fallsview Hotel and Suites in February 2018 claiming constructive dismissal as a result of harassment and bullying in the workplace. She filed a Statement of Claim in the Ontario Superior Court of Justice on April 2, 2018 claiming damages for constructive dismissal, bullying, harassment and/or a poisoned work environment pursuant to the Occupational Health and Safety Act (OHSA), the tort of harassment, as well as punitive, aggravated and/or moral damages. In particular, Ms. Morningstar claimed that she “was forced to resign from her position with [the Applicant] 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 pled further that the claim “relates to the harassment and bullying that [she] experienced as a result of a toxic work environment created by [the Applicant’s] employees and management and her subsequent constructive dismissal.”

As I explain in, my earlier post, the case was first brought before the WSIAT by the employer, who had been named in a civil lawsuit alleging constructive dismissal. Under Ontario law, an employer subject to the provisions of the Workplace Safety and Insurance Act, 1997 may apply to the WSIAT for a determination of whether the employee has the legal right to sue the employer at all. For those unfamiliar with the right or process, I detail all of this, in detail, in an even earlier post Workers Now Eligible for WSIB Benefits for Chronic Mental Stress and Workplace Harassment .

Decision of the WSIAT

The WSIAT granted the employer’s request to dismiss Ms. Morningstar’s civil claim for constructive dismissal. In allowing the employer’s application, WSIAT Vice-Chair Joanna E. Smith provided the following reasons for the Tribunal’s decision:

[29] … I note that generally the Tribunal has found that the right to bring an action for wrongful dismissal has not been removed by the WSIA. It is only in the exceptional case that this is not so, where the circumstances of the wrongful dismissal claim are inextricably linked to the work injury. See, for example, Decisions No. 3836/17, 1319/01 2, and 566/00.

[30] In my view, that exception applies 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. I find that these facts, if proven, are inextricably linked to a claim for injury governed by the terms of section 13(4) of the WSIA, as cited above. In other words, I find that the worker’s Statement of Claim is, in essence, a claim for injury resulting from alleged workplace harassment and bullying and thus is within the scope of section 13(4) as amended to provide for entitlement for chronic mental stress arising out of, and in the course of, the Respondent’s employment. Moreover, I find that the other remedies sought by the Respondent are also claimed on the same facts, of harassment and bullying in the workplace. Accordingly, I find the worker’s right of action is taken away by the WSIA, pursuant to section 26 in this case.

Decision of the Divisional Court

The Divisional Court held that those portions of WSIAT Decisions No. 1227/19 and 1227/19R that bar Ms. Moringstar’s claims for constructive dismissal and for aggravated, moral, and punitive damages are “unreasonable” and must be quashed.

The court went on to hold that, while ordinarily it would be appropriate to remit the matter to the WSIAT for reconsideration, in this case, he declined to do so. In his view, a proper consideration of the issues of this case must inevitably lead to the conclusion that Morningstar’s action in constructive dismissal as against Hilton, and her claims for aggravated, moral, and punitive damages must be permitted to proceed and “no purpose would be served in sending this matter back to a tribunal which twice arrived at or upheld the unreasonable conclusions that justify this review.”

The Honourable Alexander D. Kurke authored the Divisional Court’s reasons for its decision. In doing so, Justice Kurke pulled exactly zero punches in the court’s rebuke of the WSIAT’s decision, writing, in material part, as follows:

[4] … The WSIAT found the linkage between the applicant’s workplace accident and her claim for wrongful dismissal to be inextricable because it unreasonably failed to resort to the tools offered by the policy behind the Act, the wording of the operative provisions of the Act, and the WSIAT’s own jurisprudence. Had it done so, the WSIAT in this case could and should have been able to extricate the applicant’s action in constructive dismissal and permitted it to proceed.

[5] In my view, the aspects of the decisions under review that relate to constructive dismissal and attendant damages are not intelligible or justified. They do not conform to the rationale or spirit of the statutory scheme under which they operate – the “historic trade-off” – but instead unreasonably applied a test that was developed to forestall false attempts to bypass the Act, and unfortunately thereby weeded out what is, on its face, a legitimate claim. In so doing, the decisions ignored the careful parsing conducted on many other occasions by the WSIAT, gave little heed to the full constellation of facts in the case, and took away from the applicant in the case the ability to recover damages not available under the regime of the Act.

Realistically, by this point in the decision pretty much everyone should have a sense of how the court felt about the WSIAT’s decision.

Justice Kurke began his decision by referencing what he described as “interpretative tools”, amongst those, “the historic trade-off, the Act, and jurisprudence.”

Beginning at paragraph 46 of his reasons for decision, Justice Kurke writes,

[46] Any analysis of this issue must begin with the “historic trade-off” that the scheme of the Act represents.

[47] The Ontario workplace insurance scheme provides no-fault benefits based on collective employer liability. Under the scheme of the Act, workers receive insurance benefits by proving that their injury or disease is work-related, without having to prove that their employer was at fault for their injury or disease. In exchange, employers are protected against civil suits for work-related injuries by paying into the accident insurance fund, thus diluting, and reducing liability for any individual claim.

[48] This legislated forfeiture by employees of the right to sue in exchange for a measure of certainty of benefits for workplace injury independent of the employer’s solvency or proving the employer’s fault at trial was set out in a report into schemes of workers’ compensation authored by the Honourable Sir William Ralph Meredith, former Chief Justice of Ontario. It has been called the “historic trade-off” and explained by Sopinka J. in Pasiechnyk v. Saskatchewan (Workers’ Compensation Board), 1997 CanLII 316 (SCC), at para. 26, in the following terms…

[49] From this, it is reasonable to conclude that the lawsuits that are statute-barred are those for torts causing work-related injuries. This is the “other half” of the historic trade-off, which protects the employer from potentially crippling tort litigation while paying insurance premiums to assist injured workers. When Sopinka J. referred to the “costs and uncertainties inherent in the tort system,” and to the possibilities of recovering more from a “tort action,” and to “injured workers,” he was speaking with deliberate precision. The Act’s focus is on barring tort claims related to workplace injuries. [Emphasis added. Internal citations omitted. ~SPB]

Justice Kurke continues his thesis that “The WSIA’s focus is on barring tort claims related to workplace injuries” in under the heading, “The legislative scheme that carries the policy into effect”. Continuing at paragraph 50, Justice Kurke writes,

[50] A workplace “accident” is broadly defined under s. 2(1) of the Act, and includes (a) a wilful and intentional act, not being the act of the worker; (b) a chance event occasioned by a physical or natural cause; and (c) disablement arising out of and in the course of employment. Section 13(4) extends coverage to chronic or traumatic mental stress. Section 13(1) of the Act sets out the scope of what the scheme provides to workers for personal injury: “A worker who sustains a personal injury by accident arising out of and in the course of his or her employment is entitled to benefits under the insurance plan.”

[51] The legislative enforcement mechanism for the historic trade-off finds its place in ss. 26, 28, and 31 of the Act. The relevant provisions in the Act read as follows…

[52] Two things are immediately apparent about these provisions.

  1. A primary focus in s. 26 of the Act, both in subsections (1) and (2), is on “benefits under the insurance plan”, that is, benefits included in the Act, as set out in s. 13(1). Benefits under the insurance plan that stand in place of what could be recovered in a tort action are what the historic trade-off is about, after all.
  2. Further limiting the reach of s. 31 is the specific reference in s. 26(2) to workplace “accidents”, and that in s. 28(1) to a “worker’s injury or disease”. This carries into effect the policy behind the Act of taking away the ability to sue for personal injury, that is, under the tort regime. Contrary to the broader assertion advanced by Hilton in para. 39 of its factum, the wording “in lieu of all rights of action” in s. 26(2) can only reasonably be understood, in the context of these provisions and their wording, as referring to a tort claim or a claim for benefits available under the Act.

[53] In the context of the policy that justifies such legislation as set out in Pasiechnyk, and of the words of the provisions in the Act, any assessment under s. 31 reasonably begins from a position of restraint on the part of the WSIAT when an application is made to bar a claim that is not in tort. While the “trade-off” enacted in the legislation prevents attempts by employees at seeking to opt out of the scheme set up by the Act, employers likewise should not be permitted by the WSIAT to insulate themselves from legitimate claims outside of the realm of tort.

[54] Any failure to at least consider the type of action and the nature of compensation offered and not offered under the Act in a s. 31 analysis would appear to involve an unreasonable oversight. This is especially so in the case of damages for constructive dismissal. So, at para. 126 of WSIAT Decision No. 616/21, 2021 ONWSIAT 848, considered below, the Vice-Chair held that “[i]t is only when the damages claimed in the civil action result from the existence of a work-related personal injury that the right to bring a civil action is barred.” [Emphasis added. ~SPB]

Justice Kurke then spends a great deal of time working through a great body of WSIAT case law. I will not repeat that review here, but the purpose of such review is to bolster Justice Kurke’s point that, “The purpose of the WSIAT in s. 31 of the Act is to bar tort actions and also to root out tort claims that are disguised as other types of actions.” (Para. 58)

Justice Kurke concludes his jurisprudence review at paragraph 77 of his reasons for decision by writing:

[77] Throughout the WSIAT statutory bar jurisprudence, efforts are made to weed out claims for personal injury or personal injury claims disguised as other causes of action that would otherwise frustrate the historic trade-off. However, the WSIAT and its predecessors have also recognized that bona fide claims for constructive/wrongful dismissal should be permitted to proceed, as they are not tort actions and are distinct from personal injury claims, and attract damages for which the Act offers no compensation.

Applying that interpretation of the purpose of the “right to sue” sections of the WSIA to the facts of this case, Justice Kurke continued by writing as follows:

[94] An action for personal injury can properly be barred by the Act, but it would appear to be unreasonable to bar an action for constructive dismissal simply because the same facts that relate to that action also incidentally support an action for personal injury. Such a test ignores Canadian law permitting different causes of action to be advanced based on the same facts. To focus on the facts as linked to the workplace accident, but to disregard both the claim for constructive dismissal in its own right and the nature of the benefits sought in the action, arrogates to the WSIAT more authority than was ever intended to be granted to it. The policy behind the Act and the wording in ss. 26, 28, and 31 of the Act require more analysis than a test involving mere “factual linkage” permits.

[105] In a summary in para. 43 of the first decision, the Vice-Chair completely neglected to consider the issue of the bona fides of the applicant’s claim for constructive dismissal and focused again only on a factual linkage that so distorted the claim being advanced by the applicant. It is therefore made to appear that the applicant only left the employer because of her injury, and not as a result of the employer’s alleged disregard of its duty to provide the applicant with a safe and harassment-free workplace, thus voiding the employment contract. The employer’s conduct was accorded no different standing than that of the applicant’s colleagues:

[107] … The essence of the applicant’s allegation of constructive dismissal in this case focuses on the employer’s conduct as improperly terminating the applicant’s employment, which is an employment issue and not a personal injury claim, unlike the one sounding in negligence in Decision 371/18. The failure to recognize this distinction, which is fundamental to the historic trade-off, and then to use the case to justify barring the applicant’s claim for constructive dismissal, further underscores the unreasonableness of the decision.

In concluding his reasons for decision Justice Kurke provided the following commentary on the policy reasons to strike down the WSIAT’s decision:

[122] Such reasoning must inevitably lead to unreasonable conclusions, in that it encourages employers not to openly fire unwanted employees and suffer a claim for wrongful dismissal, but rather to make those employees’ lives so miserable in the workplace that they can be made to suffer chronic stress and be driven to resign without any fear of legal reprisal, all blithely justified under the banner of the historic trade-off.

[123] In this case, the applicant’s claim for constructive dismissal was coupled with a harassment claim and other claims. The applicant concedes, and I agree, that the harassment and other claims have been properly barred under s. 31 of the Act and cannot proceed. However, the WSIAT in both decisions under review arrived at the unreasonable conclusion that it was also appropriate to bar the applicant’s claim for constructive dismissal and attendant damages.

[124] The applicant’s claim for constructive dismissal deserves the opportunity to be tested in the courts. There is no indication that the claim is a colourable attempt by the applicant to skirt the historic trade-off; the claim for constructive dismissal does not appear to be a tort claim in the guise of an employment or contract dispute. The damages sought by the applicant are not benefits available under the Act and represent headings of damage for constructive or wrongful dismissal that have been recognized in Canadian law.

Commentary

In my first post on this subject, when the law was amended in 2018, Workers Now Eligible for WSIB Benefits for Chronic Mental Stress and Workplace Harassment , which thoroughly reviews the same law contemplated in this case, I commented as follows:

To my own mind, and I am just speculating here, the fact that an employee has been subject to workplace harassment can likely still form the basis of a constructive dismissal claim, i.e. the workplace harassment can still be pointed to as the breach of the employment agreement. Moreover… the employee can still attach to such a constructive dismissal claim a claim for aggravated damages for the manner of dismissal. What the employee can likely no longer do is claim tort damages

When the WSIAT released its decision in the Morningstar case I commented that I was skeptical of the Tribunal’s decision and wished to see it judicially reviewed, as it has now been.

While I initially had concerns about the extent of the court’s reliance on pre-amendment jurisprudence, sitting still with the court’s decision and focusing on Justice Kurke’s thesis one arrives at the conclusion that the court is correct in this case.

Personal injury claims are “tort” claims, which are demands for damages to compensate the person who has been harmed.

Constructive dismissal claims are claims in contract law, or better said employment law, and are demands for damages to compensate for the employer’s failure to properly perform the employment contract.

The Divisional Court gets this one correct. Whether Hilton seeks leave to appeal to the Court of Appeal is yet to be seen.

Contact Me

Sean Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He is an experienced trial lawyer and trusted strategic advisor with respect to matters of employment law and commercial disputes.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

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