Executive Summary: Key Legal and Evidentiary Issues

• Whether the plaintiff was constructively dismissed by the employer’s demotion and salary reduction

• The sufficiency of the employer’s efforts to rebut the claim of constructive dismissal

• Whether the plaintiff adequately mitigated her damages by seeking comparable employment

• The appropriate length of notice for a senior executive with relatively short tenure

• Whether the employer’s conduct amounted to discrimination under the Human Rights Code

• The availability and quantum of moral damages in the absence of punitive damages

Background of the dispute

Joanna McFarlane brought a constructive dismissal claim against King Ursa Inc. after returning from maternity leave. King Ursa, an advertising company, had faced significant financial difficulties during the COVID-19 pandemic, reducing its staff substantially. To support the company’s recovery, Ms. McFarlane was promoted in 2021 to Executive Vice-President of Media & Analytics with a $300,000 salary and a 5% phantom share allocation.

After her extended maternity leave, which had twice been deferred at the employer’s request, King Ursa presented Ms. McFarlane with a letter on April 3, 2023, offering a demotion to her former role of Associate Partner and Vice-President of Media & Analytics and reducing her salary to $210,000. The letter also reinstated probationary terms. Ms. McFarlane declined the offer and resigned.

Key issues and arguments

Ms. McFarlane argued that the letter constituted constructive dismissal and that King Ursa had further violated her rights by attempting to coerce her during a vulnerable period following her maternity leave. She sought damages for wrongful dismissal, along with moral and punitive damages, and alleged discrimination under the Human Rights Code.

King Ursa denied constructive dismissal and argued that Ms. McFarlane failed to mitigate her damages. It maintained that the salary reduction was a business necessity and that there was no discriminatory intent.

Court’s findings

The court found that the demotion and salary reduction independently amounted to constructive dismissal. The employer had a legal duty to structure any contractual changes carefully and fairly. The court rejected the defence’s arguments that the letter’s terms were inadvertent or that the conduct was not sufficiently serious to amount to dismissal.

On mitigation, the court held that King Ursa failed to prove that Ms. McFarlane could have obtained comparable employment. The court accepted that her efforts to seek work began shortly after her resignation, resulting in contract work by May 2023.

In determining the length of notice, the court considered the plaintiff’s senior executive status, short tenure, and the lack of available comparable positions. Based on these factors, it awarded damages based on a twelve-month notice period.

Regarding discrimination, the court declined to find that the employer’s actions met the threshold for an independent Human Rights Code violation. However, the court held that the employer’s attempt to impose a demotion—whether intentional or careless—warranted moral damages due to the undue insensitivity shown to Ms. McFarlane’s professional status and personal circumstances.

Conclusion

The court awarded Ms. McFarlane $290,615.81 in damages for constructive dismissal and an additional $40,000 in moral damages. Claims for punitive damages and the phantom share entitlement were dismissed, as the relevant triggering events had not yet occurred. Costs were left for the parties to resolve or, if necessary, to submit to the court.