Meredith Principle Does Not Preclude Constructive Dismissal Claim

Industrialization transformed western society, reorganizing economies for the purpose of manufacturing and wealth generation. These changes came with at considerable costs, some of which are only being more recently recognized, such as harm to the environment.

The more immediate and obvious harms to workers were of a greater concern a century ago and were in many ways the focus of organized labour, both before and after unions became legal on 1872, with the passing of the Trade Unions Act. This statute was enacted specifically to gain union support prior to the election that year, forming the 2nd Parliament of Canada.

Continued scrutiny of labour practices in the years that followed culminated in many ways with an emphasis on the most grievous concerns of workers – that of their bodily integrity and safety. The employer liability laws of the time were notoriously difficult to pursue, with employers wielding significant defences at their disposal such as being able to demonstrate voluntary assumption of risks inherent to the job, contributory negligence by a co-worker, or that the worker was themselves at-fault.

Pursuing such claims also invariably put workers at risk of reprisal, meaning a low likelihood of success was accompanied by the probability of subsequent unemployment. However, through the utilization of jury trials, workers were increasingly able to demonstrate that working conditions for many workplaces in Canada were inherently unsafe. The unpredictability of this type of liability for businesses led to further inquiry as to what alternatives might be possible, especially because the success of such lawsuits often had other ripple effects on workplace morale and the employer’s reputation in the community and the marketplace.

In 1913, Sir William Meredith submitted the Final Report on Laws Relating to the Liability of Employers (the “Meredith Report”) to the Ontario legislature. This report was to become the backbone of workers’ compensation legislation across Canada and was the basis of the “historic compromise,” a streamlined scheme for compensation for workers for workplace accidents, and the near absolute freedom from lawsuits for employers for those same types of accidents.

This was referred to as a compromise or a trade-off because while some would recover more from a tort action than they would under the scheme, workers were also paid immediately, whether or not the employer was solvent, and without the expense and uncertainties in the civil tort system. In reviewing this trade-off in Reference re Validity of Sections 32 and 34 of the Workers’ Compensation Act, Chief Justice Goodridge stated,

While there may be those who would receive less under the Act than otherwise, when the structure is viewed in total, this is but a negative feature of an otherwise positive plan and does not warrant the condemnation of the legislation that makes it possible.

This trade-off was considered necessary by Justice Sopinka in Pasiechnyk v. Saskatchewan (Workers’ Compensation Board) because it would be unfair to allow actions against employers to proceed where there was a chance of receiving greater compensation while still requiring employers to contribute the no-fault scheme. The five Meredith Principles remain the basis and foundation for workers’ compensation to this day: no fault compensation; security of benefits; collective liability; independent administration; and exclusive jurisdiction.

In Ontario, the Workplace Safety and Insurance Act governs the compensation and benefit scheme for workers in the province who are injured in the course of their employment. There are two separate tribunals created under this scheme, the the Workplace Safety and Insurance Board (“WSIB”) and the Workplace Safety and Insurance Appeals Tribunal (“WSIAT”). The scheme provides no-fault benefits based on collective employer liability, with employers reducing and diluting the liability for any individual claim by paying into accident insurance fund.

The function of WSIAT is to hear appeals from WSIB decisions, and is supposedly the final appellate forum for workplace safety and insurance issues in Ontario. It also has exclusive jurisdiction under s. 31 to determine whether a worker still as the right to sue an employer outside of the statutory workers’ compensation scheme. Generally the right to bring a wrongful dismissal action is not removed from the scheme, and is only taken away where the circumstances are inextricably linked to the work injury.

A recent Divisional Court decision in Morningstar v. WSIAT has shed light on this exclusive jurisdiction, especially where it may apply to constructive dismissal claims that have independent actionable wrongs and separate basis for compensation. The applicant was a survivor of uterine cancer who claimed a campaign of harassment by her colleagues due to an odour she continued to omit as a result of her illness.

The Tribunal concluded that this case was one of the rare exceptions where a private action was barred, because she was claiming constructive dismissal due to bullying, harassment and a poisoned work environment, which differs from a wrongful dismissal claim. The applicant claimed the bullying campaign created such significant mental distress that she was forced to take a sick leave and then resign, which would link her damages to a mental stress claim under s. 13(4),

Insured injuries

13 (1) A worker who sustains a personal injury by accident arising out of and in the course of his or her employment is entitled to benefits under the insurance plan.



Mental stress

(4) …a worker is entitled to benefits under the insurance plan for chronic or traumatic mental stress arising out of and in the course of the worker’s employment.

This section was only added in 2017, and was considered a progressive amendment that would help recognize that many workplace injuries today can emerge from chromic or traumatic mental stress that occurs in the workplace. It continues to be litigated extensively.

The employer in Morningstar claimed the court should defer to the substantial deference of the tribunal, and that the decisions were not so unreasonable as to be interfered with. Although the concurrence in Vavilov maintained the notion of curial deference at para 286, the joint reasons stated at para 31 that “expertise is no longer relevant to a determination of the standard of review as it was in the contextual analysis” given the appropriate respect for legislative choice to delegate the issue to a tribunal.

Consequently, the Divisional Court concluded a reasonableness standard was appropriate,

[37] As a specialized and expert tribunal which hears evidence, finds facts, decides questions of law, and deals with caselaw and policy in the area of workplace safety and the statutory insurance scheme under the Act, the WSIAT has been accorded the “highest level of deference” with respect to its decisions: Mills v. Ontario (Workplace Safety and Insurance Appeals Tribunal), 2008 ONCA 436, at para. 14; Lue v. K.& K. Recycling Services, 2015 ONSC 96, at para. 23. As a consequence, this Court has assumed a highly deferential attitude towards WSIAT decisions and has indicated that a Court will only interfere where there are no lines of reasoning that would support the decision under review: Blatz v. Workplace Safety and Insurance Appeals Tribunal, 2016 ONSC 7259 (Div. Ct.), at para. 40.

The Divisional Court reviewed the historic trade-off and concluded that the types of lawsuits that are statute-barred must be for those torts that cause work-related injuries. Although a workplace “accident” is broadly defined under the Act, the tribunal is replete with examples where workers attempt to bring a civil suit for workplace injury or disguise their claims as other forms of actions to bypass the limitations of the Act. The purpose for this scrutiny appears to be in maintaining the historic trade-off found through the Meredith Principles.

Constructive dismissal is distinct from these claims, according to the Divisional Court, because they are a claim for payment in lieu of notice due to an alleged breach of the employment contract. The decisions by the tribunal focused on the facts of the applicant and its supposed inextricable linkage with the workplace, rather than engaging with the relevant analysis as based in the statute itself,

[95] It is well-established in Canadian law that the same facts can support concurrent liability in more than one cause of action. A plaintiff has the right to assert alternative causes of action that offer advantageous legal consequences unless the plaintiff thereby improperly attempts to avoid some limitation of liability by so doing: Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, at paras. 48-54. As the general run of WSIAT cases acknowledge, so long as a plaintiff does not sue in constructive dismissal improperly to get around the limitations of the Act, the claim should be permitted to proceed, even where tort aspects of a claim are barred. Contrary to the reasoning of other WSIAT decisions in which claims in contract are barred, nowhere in the decisions under review is there any assertion that the applicant is attempting to disguise her injury claim as one sounding in constructive dismissal in order to avoid the limitations of the historic trade-off.

[110] The historic trade-off that the Act represents prevents workers from suing in tort. WSIAT jurisprudence has recognized that, generally speaking, wrongful dismissal actions will not be barred under s. 31. This makes sense, as wrongful dismissal involves employment and contract law, not tort law, which is the subject area of the historic trade-off. In order to ensure that workers do not evade the boundaries of the Act, the WSIAT also has barred actions where the cause of action appears in reality to be a disguised WSIB claim. However, earlier WSIAT decisions have consistently recognized that what also sets wrongful dismissal actions apart are damages that are not available under the Act. Not so the Decisions under review.

[112] The holdings in the decisions under review unreasonably fail to consider that the claim for wrongful dismissal focuses on a different legal relationship than the claim for harassment and requires compensation for damages not within the purview of the Act. Sections 26, 28, and 31 encourage the WSIAT to consider issues relating to benefits available under the Actand emphasize that it is claims involving personal injury that are at issue. In the decisions under review, the linkage of “all damages claimed” to the “personal injury”, sweepingly disregards the pleading for damages in lieu of notice, and aggravated, moral and punitive damages, which are all clearly linked in law to the employer’s alleged disregard for the applicant’s terms of employment.

[124] The applicant’s claim for constructive dismissal deserves the opportunity to be tested in the courts. There is no indication that the claim is a colourable attempt by the applicant to skirt the historic trade-off; the claim for constructive dismissal does not appear to be a tort claim in the guise of an employment or contract dispute. The damages sought by the applicant are not benefits available under the Act and represent headings of damage for constructive or wrongful dismissal that have been recognized in Canadian law.

The Divisional Court concluded that this emphasis on the facts failed to attend adequately to the language chosen by Parliament to delineate the limits of the authority (Vavilov, paras 108-110). However, the Court has also required that decision makers must justify a decision in light of a general factual matrix and the evidence before them (Vavilov, para 126), including grappling meaningfully with the key arguments or central issues raised by a party (Vavilov, paras 127-128).

While the merits of this claim have yet to be fully tested, it does suggest that for cases where the workplace environment caused an injury that resulted in a claim that the employment contract was breached will not automatically be dismissed. The Divisional Court arrived at this conclusion only because of the increased scrutiny now required under Vavilov, but also because of the complex and overlapping nature of these types of claims.

There is a distinction in law between seeking damages specifically for the personal injury due to chronic or traumatic mental stress arising out of and in the course of employment, and claim that the employment contract has been effective breached because an employer failed to take proper actions to prevent this same chronic or traumatic mental stress. This distinction is correct, but also ignores that the distinctions between contract and tort law are sometimes arbitrary, and these areas can and do overlap. The entire premise behind common law payment in lieu is a prospective calculation of damages in the form of lost wages, even if it is characterized as an effective calculation of the end of the term of a special contract.

More puzzling is the inordinate emphasis by the Divisional Court on the historic trade-off in their analysis, in an attempt to display appropriate respect and deference to the legislature through consideration of the rationale and purview of the statutory scheme under which a decision is adopted. This legislative scheme presumably contains the broadest scope of delegated authority by the legislature (Vavilov, paras 108-110), even more than the strongest privative clause. The privative clauses under ss. 123(4) and 31(3) of the Act are described in Rodrigues and Blatz as the toughest in Ontario, which led the Divisional Court to adopt a reasonableness approach in this case. However, identifying the appropriate standard of review is still distinct from how that review is conducted, and the concurrence in Vavilov highlighted at para 248 some inconsistencies in the majority’s approach to privative clauses.

The crucial characteristics of this trade-off as found in the Meredith Principles as enshrined in the legislation include an assumption that there is no argument or dispute over responsibility or liability as part of the no-fault compensation, because workers are paid regardless of how any injury occurred. These principles also are premised on a notion of exclusive jurisdiction, which includes an acknowledgement that the board is the final authority of all claims. This may no longer be justifiable given the Court’s reformulated approach to judicial review, but is still difficult to reconcile with a statutory interpretation approach that is consistent with the text, context, and purpose (Vavilov, paras 119-124) as described above. The distinction may simply come down to how the decision of the administrative tribunal member is formulated (Vavilov, paras 102-104).

One of the greatest concerns of the 2017 amendments was that the addition of mental health claims to the scheme would ultimately provide financially unsustainable. The often amorphous nature of such claims, and difficulty obtaining objective evidence to support them, have given rise to legitimate concerns that the guarantee of funds alluded to in the security of benefits may not hold true. Critics rightly point out that the magnitude of such claims directly threatens the security of benefits principle, and that the total cost of such claims without additional governmental funding may be incompatible with the total cost of compensation being shared under the principle of collective liability.

If these claims proceed instead on the basis of constructive dismissal based on an employer’s inability or ineffectiveness in preventing these workplace harms, that concern may not materialize because those claims are advanced in a different venue. The unpredictability of such claims, and their broader effects on the employer, may be far more reminiscent of the type of claims advanced prior to the Meredith Report and the very creation of the historic trade-off.

This decision does not guarantee that such claims would be barred, only that it is not automatically presumed. How courts apply the new reasonableness standard of review to such claims will likely continue to evolve and change further over time.

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