Statutory caps on severance tested in constructive dismissal dispute

The Court of King's Bench of Alberta recently dealt with an application by a public servant who claimed she was constructively dismissed after approximately five years of employment.

The worker sought damages based on common law reasonable notice principles, which typically provide more generous compensation than statutory minimums.

However, her employer argued that recently enacted caps on severance pay applied to her claim, significantly limiting what she could receive.

In 2019, the provincial legislature amended public service employment legislation to cap notice periods for employees dismissed without cause. The amendments limited severance to a maximum based on years of service.

Critically, another provision stated that these changes would not themselves give rise to constructive dismissal claims. This specific mention of constructive dismissal became the focal point of the legal dispute.

The case raised a question with broad implications for public sector workers: do statutory caps on severance pay for employees "terminated without cause" apply to constructive dismissal claims?

The worker argued the caps only applied when an employer expressly fires someone, not when the employer's conduct forces the worker to leave.

The employer countered that constructive dismissal is simply a form of termination without cause and the caps apply equally.

Legislative amendments capping severance

The provincial legislature amended the governing legislation in 2019 to address notice periods for employees dismissed without cause.

The amendments stated that notwithstanding any right existing at common law, an employee who is terminated without cause is entitled to a limited period of notice based on years of continuous service.

Where an employee has less than one year of continuous service, they are entitled to two weeks' notice. Where an employee has one or more years of continuous service, they are entitled to four weeks for every full year up to a specified maximum.

An employee who is terminated without cause may be provided severance pay in lieu of notice. The amount is determined by a formula based on the employee's base salary and the number of weeks for which severance is to be provided.

Additionally, another section stated that the changes to notice periods would not give rise to constructive dismissal.

This provision stated that neither the enactment or application of the sections nor changes to compensation shall be considered constructive dismissal or breach of contract.

The parties agreed that the legislation governed the worker's employment. The worker argued that the legislative intent was only to limit damages where the employer expressly terminates someone without cause and does not extend to constructive dismissal.

The employer argued that the provision encompasses constructive dismissal as a form of termination without cause.

Worker's statutory interpretation argument

The worker argued that "terminated without cause" is a legally distinct concept from "constructive dismissal."

The worker acknowledged that constructive dismissal results in termination without cause, but argued the concepts are distinct because a termination without cause is not itself a breach of contract whilst constructive dismissal inherently requires a breach of contract.

The worker referred to legal authority explaining that termination without cause does not involve a breach of the contract, and that the right to terminate on reasonable notice is one of the implied terms of the agreement.

The worker relied on principles of statutory interpretation, noting that when the legislature intends to limit legal rights, it must do so expressly.

The worker pointed to the presumption of consistent expression, which presumes that when different terms are used in a single piece of legislation, they must have different meanings.

The worker noted that one section specifically refers to constructive dismissal whilst another section refers to "terminated without cause."

Since different phrases are used, the worker argued they must mean different things.

The worker also argued that the legislation was benefits conferring and therefore ambiguities should be resolved in favour of the employee.

The worker argued that the heading for the provision limiting severance, which referenced notice of termination and severance pay, supported an interpretation that such pay is not intended for constructive dismissal situations.

Employer's position on scope

The employer argued that constructive dismissal is not a separate concept from termination without cause, but rather is a form or type of termination without cause.

The employer submitted that the amendments were clearly intended for fiscal responsibility and predictability around termination pay. Leaving out constructive dismissal from the cap would not be logical or consistent with that intent and purpose and would create a gap in the statutory scheme.

The employer argued that whilst the governing legislation confers some benefits, the purpose is not itself benefits conferring but is rather a comprehensive code for managing the provincial public service.

The employer submitted that a plain reading of the limiting provision in context of the entire statute shows its intent is to limit the employer's liability for severance pay and provide predictability around severance entitlement.

The employer referred to evidence of political debate around implementing the 2019 changes. The employer argued this evidence supported the overall intent of the amendments as focused on fiscal responsibility.

The employer submitted that the legislative intent in the context of the overall statutory scheme supports that constructive dismissal is included in the statutory cap on notice periods.

Court's analysis of terminology

The court noted that "terminated without cause" and "constructive dismissal" are legal terms and should be given their technical meaning in the context of the overall legislative scheme.

The court stated that "terminated without cause" is a longstanding legal term in employment law describing the right of an employer to terminate a non-unionised employee for any reason other than for cause by providing reasonable notice or pay in lieu.

The court noted that when an employer terminates an employee without cause, the damages arise from the employer's failure to provide reasonable notice or pay in lieu.

Other damages may also arise, like punitive and aggravated damages, but generally wrongful dismissal damages for termination without cause focus on the reasonable notice period. The court stated these are the exact same damages that arise in constructive dismissal.

The court stated: "That is also precisely what happens in constructive dismissal. When the employer unilaterally changes the fundamental terms of employment, the law deems the employer to have terminated the contract without reasonable notice."

The court found: "Like classic terminations without cause, the damages arising from constructive dismissal are not for the termination itself, but rather from the breach of the implied term of the employment contract to provide reasonable notice or pay in lieu. The available remedies in each case are the same."

Constructive dismissal as termination form

The court noted that courts have consistently viewed constructive dismissal as a form of termination without cause.

The court referred to authority where another court explained that a situation constituted constructive dismissal, which is a termination without cause.

The court also referred to authority where a court found constructive dismissal and concluded that the worker was therefore terminated without cause.

That decision was upheld on appeal, with the appeal court observing: "When there is evidence of a unilateral change in the terms of employment, the employer runs the risk of being found by a court to have terminated the employee without cause."

The court stated: "Constructive dismissal is therefore not a separate concept from termination without cause; rather, it is a form or type of termination without cause."

The court agreed that when the legislature intends to limit legal rights, it must do so expressly.

The court found that this was done in the provisions at issue. In the provision limiting severance, the legislature put a cap on pay in lieu of notice, expressly noting that cap was "notwithstanding any right existing at common law."

The court stated: "That was a clear and express limitation of rights in the statute."

Express limitation of rights found

The court found that the section stating the amendments would not give rise to constructive dismissal also worked to expressly limit rights.

The court stated: "The Legislature deliberately referenced constructive dismissal. It did this to be clear and unequivocal in its intent to limit rights. It identified the specific legal risk and rights it was affecting. That limitation is consistent with the intent and purpose of the amendments to support fiscal responsibility around termination pay."

The court addressed the worker's argument about the presumption of consistent expression.

The court stated: "While I agree in principle, in this case the separate terms denote differences in nuance and clarity for the express limitation of rights."

The court found the legislature intended to convey different meaning by using separate terms, but not in the way the worker asserted.

It found that in the provision limiting severance, the legislature referred to the broad category of terminations without cause, which includes constructive dismissal and other forms.

The court stated: "In [the section stating amendments would not give rise to constructive dismissal], the Legislature highlighted the specific legal claim it intended to limit, that being constructive dismissal claims arising from the caps on severance being put in place. The different terms used here arise from the purposes of [the two sections] and the obligation to be clear and express when limiting legal rights, not because there was legislative intent to exclude constructive dismissal claims from the legislative scheme."

Court's final determination

The court stated: "It is clear from the purpose and context of the entire [legislation] that the Legislature's intent was to create a comprehensive legislative scheme for governance of the public sector workforce. The 2019 amendments were clearly intended for fiscal responsibility and predictability around termination pay."

The court found that leaving out constructive dismissal from the cap would not be logical or consistent with that intent and would create a gap in the statutory scheme.

The court addressed the worker's argument that the legislation was benefits conferring and therefore ambiguities should be resolved in favour of the employee.

The court found: "While there are some benefits conferred, the scheme and purpose of the [legislation] is not itself benefits conferring legislation but rather a comprehensive governance code for managing the public sector workforce. Additionally, there is no ambiguity here, so this presumption is not needed."

The court also addressed the worker's argument about the heading for the provision.

The court stated: "While headings can assist with understanding the structure and overall scheme, they are not themselves statutory language... The absence of a reference to constructive dismissal in the heading does not change the plain and obvious meaning of the statutory language in the context of the legislative scheme."

The court concluded: "The Legislative intent of [the provision] in the context of the overall statutory scheme supports that constructive dismissal is included in the statutory cap on notice periods for terminations without cause." The application was dismissed.