The Evolving Role of Trust in the Contractual Employment Relationship
Will employment law develop to allow a constructive dismissal claim to be based only on employer dishonesty?
In an August 12, 2015 decision: Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357, the BC Court of Appeal made some further tentative steps towards recognizing that the employment relationship also requires an employer to maintain the trust of its employees.
For centuries, the Courts have emphasised that an employee owes the employer a duty of honesty, integrity and fidelity. These are words used to describe a relationship of trust. However, until recently, this concept of trust was a one-way concept. The employee had to earn and maintain the trust of his or her employer but it was always presumed that the employer always acted with integrity and honesty towards its employees.
Until the Supreme Court of Canada decision in McKinley v. B.C. Tel, 2012 SCC 38 (CanLII), the consensus of common law authority held that any incident of employee dishonesty would amount to just cause for dismissal. Since McKinley, employee dishonesty must be weighed in a contextual analysis taking into account factors such as the seriousness of the incident and the employee’s entire record of employment.
In 1997, the issue of an employer acting in a “trustworthy” manner was addressed in two appellate decisions. In a case which changed the law of damages for many years, Wallace v. United grain Growers Ltd., 1997 SCC 332 (CanLII), the Supreme Court of Canada first expressly recognized an actionable duty of good faith on the part of the employer but only went so far as to impose this duty at the time of termination of employment:
“In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal . .”
Also in 1997, the BC Court of Appeal release its decision in Deildal v. Tod Mountain Development Ltd., 1997 BCCA 4076 (CanLII) where the Court stated:
“The contract under consideration here is not a simple commercial exchange in the marketplace of goods and services. A contract of employment is typically of longer term and more personal in nature than most contracts, and involves greater mutual dependence and trust, with a correspondingly greater opportunity for harm or abuse. It is quite logical to imply that the parties to such a contract would, if they turned their minds to the issue, mutually agree that they would take reasonable steps to protect each other from such harm, or at least would not deliberately and maliciously avail themselves of an opportunity to cause it.”
Recently, the Courts have considered the conduct and integrity of the employer in the context of an employer’s offer of re-employment is a means of mitigating wrongful dismissal damages.
In the Fredrickson decision, the Court of Appeal overturned the trial judge’s decision which held that the dismissed employee was required to accept an offer of re-employment and thus damages were only awarded up to the date of the offer of re-employment.
In its reasons, the Court of Appeal stated:
In my respectful view, the judge erred in respect to the mitigation issue in two ways: failing to accord significance to the incomplete nature of the offer; and failing to reflect the intangible element of mutual trust, commensurate with the nature of the employment, that flows like a current in the employment relationship. [underlining added]
And further:
Independent of the above, I am of the view that the trial judge was clearly wrong in failing to reflect the mutuality of trust, in the context of this employment, inherent in the relationship between employer and employee. The pertinent question when mitigation is in issue was described by Justice Bastarache as whether “a reasonable person in the employee’s position would have accepted the employer’s offer”. To determine whether this is so, in my view requires a judge to consider the full nature of the employment relationship. This includes the obligations of good faith or fidelity on the part of both the employer and employee, consistent with the nature of the work and the workplace. Most frequently questions of good faith, fidelity and fair dealing are questions that arise in the context of allegations of cause for the employee’s dismissal. The integrity of the employment relationship goes further, however. Just as trust of an employee, in the circumstances of the employment, is an important aspect for the employer, so too trust of the employer is important.
To this writer’s knowledge, this is the farthest an appeal Court in Canada has come in expressing the still emerging concept that an employer must also act with honesty, integrity and that the essential trust in the employment relationship is a mutual obligation.
Will the law develop to allow a constructive dismissal claim to be based only on employer dishonesty? Time will tell but the law seems to be developing slowly in that direction.