By Stephen Dugandzic
The Ontario Superior Court of Justice’s decision in Scarrow v Walkey et al, 2024 ONSC 3876, underscores key legal principles in employment law, particularly concerning constructive dismissal, implied contractual terms, and employer obligations.
Constructive Dismissal and Employer Conduct
The Court determined that Mr. Walkey constructively dismissed Mr. Scarrow by placing him on an unpaid layoff without notice and later proposing a return under significantly altered conditions, including reduced pay and duties that could exacerbate prior injuries. Such actions breached essential terms of the employment agreement, indicating the employer no longer intended to be bound by it. This aligns with established principles where unilateral changes to employment terms can constitute constructive dismissal.
Implied Terms and Promissory Estoppel
A pivotal aspect was the employer’s promise of a retiring allowance—specifically, 8–10% of nonvoting shares in a farm business—which Mr. Scarrow relied upon for over a decade. The Court found this promise created an implied term in the employment contract. Failing to honour it amounted to a breach, highlighting that long-standing promises, even if not formalized in writing, can be enforceable when an employee relies on them to their detriment.
Damages and Employer Obligations
The Court awarded Mr. Scarrow substantial damages:
• $109,980 for wrongful dismissal
• $250,000 for the unfulfilled retiring allowance
• $5,000 for unpaid wages
• $70,000 in aggravated and punitive damages
These awards reflect the employer’s failure to act in good faith, causing significant personal and financial hardship to the employee.
Key Takeaways
This case serves as a cautionary tale for employers:
• Unilateral changes to employment terms can lead to constructive dismissal claims.
• Promises made to employees, especially concerning compensation or retirement, may become enforceable contractual terms if relied upon.
• Employers must handle terminations with transparency and fairness to avoid additional damages.
Overall, Scarrow v Walkey reinforces the importance of clear, consistent, and fair employment practices, emphasizing that employers can be held accountable for promises and conduct that adversely affects their employees.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018.