Lessons Learned – Transitional Period Permitted During Significant Company Changes

15. October 2020 0

The employee Costello brought a summary trial application for constructive dismissal on the basis that the employer ITB Marine Group Ltd. (“ITB”) breached its contract with her in three ways:

1) Removing all or substantially all of her duties;

2) Creating an unsafe working environment, including moving her to a new premises that was objectively unsuitable or unsafe; and

3) Responding to her expressed desire to remedy the issues in an aggressive disdainful manner.

The court applied the test outlined in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 and dismissed Costello’s constructive dismissal claim and found that ITB’s conduct did not repudiate the employment contract or dismiss Costello without notice.


Costello worked for ITB or its predecessors for 34 years. She started the business with her husband, and continued working for ITB out of the North Vancouver office after it was sold in 2011. After the sale, Costello entered into an employment contract with ITB for a one year term, and then continued afterwards on an oral contract. In 2018 ITB consisted of two kinds of operations, commercial diving services and the installation/maintenance of underwater cables. In the fall of 2018 ITB sold the commercial diving arm of the business and planned to close the North Vancouver office and relocate it to Burnaby effective January 2, 2019. The transition did not go well for Costello. She was placed in an unsatisfactory office and she had little work to do. Costello complained in an email to her supervisors dated January 21, 2019, and met with them on January 24, 2019. In the meeting, Costello requested a “settlement”, which her counsel reiterated in correspondence sent the next day.


The court assessed:

1) What rights and responsibilities were afforded under the employment contract;

2) Was the contract breached by the employer interfering with those rights and responsibilities; and

3) Would a reasonable person in that position feel that the essential terms of the contract were substantially changed.

Issue #1 – Did ITB strip Costello of substantially all of her job duties?

The court found that Costello’s duties remained the same. Her title and salary remained the same even after the sale of the commercial diving arm, and she retained the responsibilities commensurate with her prior role in the company. Until her email of January 21, 2019, Costello did not inform her superiors that she had nothing substantial to do, and did not give them a reasonable opportunity to respond to this complaint before she took the position that she had been constructively dismissed. ITB was in a state of transition, and in the meeting of January 24, 2019, Costello was informed of several large upcoming projects that would require her assistance. The court found that ITB’s contract with Costello did not commit ITB to providing Costello work she had traditionally performed. The court also found that some changes were necessary after taking into consideration the sale and restructuring, and that ITB should be allowed a reasonable time to manage the transition.

Issue #2 – Did ITB require Costello to work in unsafe environment?

ITB’s lease in North Vancouver expired at the end of December 2018, and they then moved their office to a floating barge located in Burnaby. Costello suffered from motion sickness, so ITB moved Costello into a temporary trailer as ITB’s new office (also in a trailer) was not ready. The temporary trailer was unsafe, as it had black mould growing and the stairs were a potential hazard. Costello complained, and ITB agreed that the trailer was unsafe and allowed Costello to work from home in the meantime. The court concluded that a reasonable person in Costello’s position would not have concluded that the essential terms of her contract were substantially changed by the aborted move or the arrangement allowing her to work from home.

Issue #3 – Did ITB address Costello in an aggressive and disdainful manner?

Although the meeting was on January 24, 2019 was tense and tempers were present, there was no evidence that Costello’s superiors raised their voices or used inappropriate or disrespectful language. The court found that this meeting did not involve a breach by ITB of its employment contract with Costello.


Costello was not entitled to take the position that ITB had dismissed her without cause and without notice.

Notes for Employers

When a company is undergoing a significant change such as a restructure or a relocation, an employer is afforded a period of transition as demonstrated in this case. During a transition, employers should always make reasonable efforts to accommodate staff while operations get back to “normal”, and always be mindful of their interactions and conduct with employees.

Have further questions regarding constructive dismissal? This post was authored by Ryan Chan. Please don’t hesitate to contact him at rchan@harpergrey.com or anyone else listed on the authors page.