A malfunctioning winch, a demotion, and a $125,640 court correction
A tow truck driver's disability leave sparked a legal showdown over whether his employer's finances could excuse a demotion. Ontario's top court sided mostly with the worker but slashed the damages award over how the company treated the truck and phone he used on the job.
In an August 10, 2026, decision, Justice L.B. Roberts of the Court of Appeal for Ontario, writing for a panel including justices Favreau and Rahman, upheld a Superior Court finding that a former road boss at a towing company was constructively dismissed rather than lawfully let go through frustration. The 22-month notice period stood, but the court cut $125,640 from damages, reducing them from $236,163.77 to $110,523.77.
A demotion follows a long disability leave
The employee had worked at the towing company for about 17 years, most recently as road boss, when he went on long-term disability leave in May 2020 after emergency surgery. His physician recommended modified duties, including no heavy lifting above 30 to 40 pounds and no work at heights, and later suggested a trial return under the same restrictions.
During his absence, the company's co-owners took over his road boss duties. Meeting with him in September 2021, they said the role had been eliminated for financial reasons and that he would return as a tow truck driver at lower pay, with eight weeks at his former pay level. The company confirmed the change in a letter that January.
The employee said he did not accept the demotion or pay cut and considered it a constructive dismissal, though he returned as a tow truck driver in January 2022. He later injured his back when the truck's winch malfunctioned, he testified. After more medical leave, he again claimed constructive dismissal that February. The company treated that as a resignation, and he sued soon after.
Why the court rejected the frustration argument
The company argued the contract had been frustrated because the employee's physical limitations meant he could no longer perform the road boss role's essential duties. Frustration ends a contract without fault on either side, but only where there is no reasonable likelihood the employee could return within a reasonable time. The onus was on the company to prove that.
Justice Roberts found the trial judge's rejection of that argument was well supported by the record. The company had previously accommodated the employee's lifting restrictions, including by installing a specialized winch, and his doctors had said a trial return could be considered. The co-owners had also absorbed his duties for 19 months without apparent disruption to the business.
The employee testified his back injury came from an equipment failure, not his limitations, saying "I would have been able to do it" had the winch not malfunctioned. The court agreed the company had not shown the malfunction was linked to his condition, and found no medical evidence he could never return to his essential duties within a reasonable time.
Why the court excluded the tow truck and phone from damages
The trial judge had included $123,000 for lost use of the company tow truck and $2,640 for a cellphone in the damages award, treating both as benefits lost during the notice period. The Court of Appeal disagreed, finding the trial judge had not explained why those amounts qualified as lost benefits rather than ordinary work tools.
Justice Roberts noted the employee had not pleaded personal use of the truck in his claim, and the company's T4 slips never listed it as a taxable benefit. The vehicle, a heavy, specialized truck comparable to a school bus, served business purposes, with only negligible personal use tolerated by the company.
On the cellphone, the court found no evidence his personal use amounted to a benefit, noting it was replaced by a two-way radio once he returned. Justice Roberts wrote that "it defies belief that the tow truck was intended as a personal benefit." The court cut the damages accordingly, dismissed the rest of the appeal, and the company agreed to pay $10,000 in appeal costs.
See Hill v. 1359768 Ontario Inc. (B&B Towing), 2026 ONCA 577
