COURT OF APPEAL FOR ONTARIO

DATE: 20000320

DOCKET: C30872

RE: VIREN SHAH (Plaintiff/Respondent) v. XEROX CANADA
LTD. (Defendant/Appellant)

BEFORE: OSBORNE A.C.J.O., LASKIN and BORINS JJ.A.

COUNSEL: Darryl A. Cruz
For the appellant

Anna Perschy
For the respondent

HEARD: February 2, 2000

On appeal from the judgment of Cullity J. dated October 22, 1998

E N D O R S E M E N T

[1] The plaintiff, Viren Shah, worked for Xerox for twelve and
one-half years. On May 21, 1996 he resigned. He then sued for
wrongful dismissal. The trial judge, Cullity J., concluded that
before his resignation Shah had been constructively dismissed by
Xerox. Cullity J. held that Xerox’s treatment of Shah made his
continued employment intolerable and, therefore, amounted to an
unjustified repudiation of the employment relationship. He
awarded Shah damages equivalent to twelve months notice.

[2] Xerox appeals only against liability. It makes one
submission: the trial judge applied the wrong legal test for
constructive dismissal, and had he applied the correct test he
would have had to conclude that Shah had not been constructively
dismissed. Xerox argues that the trial judge should have
ascertained the terms of Shah’s employment contract and found
that he was constructively dismissed only if Xerox had
unilaterally changed a fundamental term of that contract. In
other words, to establish that he had been constructively
dismissed, Shah had to show that Xerox had breached a specific
fundamental term of his employment contract.

[3] In making this submission Xerox relies on the judgment of
the Supreme Court of Canada in Farber v. Royal Trust Co., [1997]
1 S.C.R. 846 at 864, and on the reasons of this court in Re
Stolze and Addario (1997), 1997 764 (ON CA), 36 O.R. (3d) 323.

[4] In Farber, Gonthier J. wrote at p. 864:

Thus, it has been established in a number of

Canadian common law decisions that where an

employer unilaterally makes a fundamental or

substantial change to an employee’s contract of

employment – a change that violates the contract’s

terms – the employer is committing a fundamental

breach of the contract that results in its

termination and entitles the employee to consider

himself or herself constructively dismissed.

[5] In Re Stolze this court similarly stated at p. 326:

The law is clear that in assessing whether there

has been a constructive dismissal of an employee

the terms of the employment contract between the

parties must be ascertained. The court must then

consider whether the act or acts of the employer

have been such as to constitute a repudiation of

the fundamental terms of the contract. If so, the

employee was constructively dismissed when the

facts constituting the repudiation were completed.

[6] Cullity J., however, concluded that the court may find an
employee has been constructively dismissed, without identifying a
specific fundamental term that has been breached, where the
employer’s treatment of the employee makes continued employment
intolerable. We agree with Cullity J. The passages from Farber
and Re Stolze relied on by Xerox reflect a more general principle
of contract law. Gonthier J. referred to this general principle
in Farber at 195:

In cases of constructive dismissal, the courts in

the common law provinces have applied the general

principle that where one party to a contract

demonstrates an intention no longer to be bound by

it, that party is committing a fundamental breach

of the contract that results in its termination.

The application of this principle will vary depending on the
conduct of the employer in question.

[7] In cases where an employer requires an employee to relocate
or take on a different position as part of a restructuring, the
court, obviously, must decide whether in doing so the employer
has changed a fundamental term of the employment contract.

[8] In some cases, however, the employer’s conduct amounts not
just to a change in a specific term of the employment contract
but to repudiation of the entire employment relationship. For
example, in Whiting v. Winnipeg River Brokenhead Community
Futures Development Corp. (1998) 1998 19422 (MB CA), 159 D.L.R. (4th) 18 (Man. C.A.),
the trial judge concluded that an employee had been
constructively dismissed because of a series of incidents
culminating in the imposition of probation. The employer had
unjustifiably criticized the employee, levelled vague and
unfounded accusations against her, and created a hostile and
embarrassing work environment. The trial judge concluded that,
“viewed objectively, the plaintiff’s continued employment in such
environment was no longer possible.” This conclusion was upheld
by the Manitoba Court of Appeal. Thus, the decision in Whiting v.
Winnipeg reflects the general principle referred to by Gonthier
J. in Farber. The employer in the Whiting case had by its conduct
demonstrated an intention no longer to be bound by the contract.

[9] The case before us is similar. Xerox’s treatment of Shah
between November, 1995, and May, 1996, demonstrated that it no
longer intended to be bound by the employment contract, and that
it had, therefore, constructively dismissed Shah. The following
evidence reasonably supports Cullity J.’s finding of constructive
dismissal.

(a) until taking on the new position of technical support

analyst in May, 1995, Shah had had a successful career

at Xerox, regularly receiving good performance reviews,

bonuses and pay raises;

(b) the performance concerns raised by Shah’s new manager

in November, 1995, were largely unsubstantiated and

resulted from a misunderstanding about Shah’s duties;

(c) the subsequent critical performance review on March 18,

1996 provided few details and relied on reports that

were not verified;

(d) the warning letter received by Shah the following day,

March 19, 1996, was not only unexpected, but was

unjustified;

(e) the warning letter of May 14, 1996, “was again short on

specifics” and again “without justification”;

(f) the letter of May 17, 1996, putting Shah on probation

was also unwarranted. The trial judge found that,

instead of telling Shah what was expected of him and

giving him a reasonable opportunity to respond to the

criticisms against him, the responsible Xerox manager

became "more authoritarian, impatient and intolerant”

and “subsequently acted impulsively and without

justification.”

[10] On this evidence Cullity J. could reasonably find that Xerox
had made Shah’s position intolerable and had constructively
dismissed him. That finding is entitled to deference in this
court. We have not been persuaded that we should interfere with
it.

[11] The appeal is therefore dismissed with costs.

“C.A. Osborne ACJO”

“J.I. Laskin J.A.”

“S. Borins J.A.”