Workplace Wire

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No Class Action Certification for Constructive Dismissal Claims


Employee-driven class action claims continue to be a hot topic in Ontario.  Typically, the critical issue for class action certification in the employment-context is the “common issue” requirement – is there a common issue among the plaintiffs capable of being determined on a class wide basis that would sufficiently advance the litigation to justify certification.

Recently, in Kafka v. Allstate Insurance Company of Canada (“Kafka”), the Ontario Divisional Court confirmed that the common issue requirement will not be met in claims of constructive dismissal.  These types of claims are not appropriate for class action certification as they require an individualized inquiry to determine whether the employer has made a unilateral and fundamental change to the terms of each employment relationship.  What is a fundamental to one employee may be minor to another; consequently, individual circumstances and individual reactions must be considered before a determination of constructive dismissal can be made.

In Kafka, Allstate provided its employees with two years’ advance notice of a significant change to its business model which altered its agents’ compensation structures as well as their responsibilities. Approximately 100 Allstate employees were impacted by these changes, but the employees’ reaction to the changes varied.

Some employees accepted the changes, others negotiated further changes, and others resigned.  These varying reactions highlight the need for an individualized assessment.  If Allstate’s employees had unanimously responded to the changes by walking off the job and claiming constructive dismissal, the court may have reached a different conclusion regarding commonality.

The Kafka decision also comments on an employer’s ability to avoid a constructive dismissal claim by providing sufficient advance notice of a fundamental change to the terms of employment.  The plaintiffs in Kafka argued that an employer could never effect a unilateral and/or fundamental change with any amount of advance notice, but, instead, an employer is obligated to terminate the employees and then offer to rehire them on the amended terms of employment.  As support for this position, the plaintiffs cited the Ontario Court of Appeal’s decision in Wronko v. Western Inventory Service (“Wronko”).

The circumstances of Wronko, however, were very different from those in Kafka.  In Wronko, the employee specifically objected to the employer’s unilateral change, but there was ambiguity regarding the employer’s response to this objection.  On the basis of this ambiguity, the court found that the period of time between the announcement of the change and the employee’s resignation could not be characterized as a working notice period.

The court confirmed in Kafka that the circumstances of Wronko were unique and the decision very fact specific.  While notification of termination is required in circumstances where an employee objects to a fundamental change, no such requirement exists where an employee either specifically accepts the change or is silent following notification of the change.   When announcing a fundamental change to the terms of employment, a clear and unambiguous announcement that provides ample notice of the change will serve an employer well.  But employers should also take note that an equally clear and unambiguous response must be made when faced with an employee’s objection to the change.

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