Executive Summary: Key Legal and Evidentiary Issues

• A sales manager with over 20 years of service claimed constructive dismissal after his employer presented him with a materially altered employment contract.
   
• The court applied the two-branch test from Potter v New Brunswick Legal Aid Services Commission to find that imposing non-negotiable changes to termination pay and restrictive covenants breached essential contract terms.
   
• Fifteen months' reasonable notice was awarded based on the employee's length of service, age, and the nature of his position, though the employer's mitigation defence failed for lack of evidence.
   
• Aggravated damages were denied because the employer's conduct, while improper, did not rise to the bad-faith standard set in Honda Canada Inc v Keays.
   
• Prejudgment interest was ordered on a midpoint basis under the Alberta Court of Appeal's approach in Christianson v North Hill News Inc, running from September 10, 2023.
   
• Costs were assessed under Column 2 of Schedule C, with a 50% reduction to the trial-preparation tariff and an allowance for the agreed statement of facts, but without doubling for an unsuccessful formal offer.
   

Facts of the case

Dwayne Yakubow worked for Edmonton Granite Memorials Ltd. for more than 20 years, rising to sales manager, without ever signing a written employment contract. On January 20, 2023, the company's owner, Paul Crosty, presented Yakubow with a new written contract that altered his job title and duties, replaced discretionary bonuses with a formal bonus structure, limited termination pay to Employment Standards Code minimums, and added non-solicitation and non-competition clauses. Over the following days Crosty pressed Yakubow to sign, telling him other employees had already accepted similar terms and bringing in two colleagues to encourage him to agree. The contract was dated as accepted on the day it was presented and stated to take effect the following Monday, leaving no real opportunity for legal review. Yakubow resigned on January 26, 2023, asserting constructive dismissal, and sued for wrongful dismissal and aggravated damages.

Policy and legislative provisions at issue

The dispute turned on the unwritten common law terms of Yakubow's original employment, including implied reasonable notice of termination and the absence of restrictive covenants, compared against the new contract's provisions. The Employer's proposed contract would have capped termination pay at Employment Standards Code minimums and introduced non-solicitation and non-competition clauses with no equivalent in the original relationship. On damages, the court applied the Judgment Interest Act, RSA 2000, c J-1, to determine how prejudgment interest should run. Costs were governed by the Alberta Rules of Court, including Rule 10.29 (the general entitlement of a successful party to costs), Rule 10.33 (factors for quantifying a costs award), Rule 10.31(3)(a) (discretion to depart from Schedule C), and Rule 4.29 (costs consequences of a formal settlement offer beaten at trial).

Reasoning and analysis

Applying the two-branch test from Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10, the court first found that the new contract altered at least five essential terms of Yakubow's unwritten agreement, any one of which would likely have satisfied the first branch. On the second branch, the court held that Crosty's conduct — presenting the contract with almost no time for review, repeatedly insisting its core terms were non-negotiable, and never retracting that position — objectively signalled an intention not to be bound by the existing contract, even though the new contract was never formally implemented. The court distinguished Rampre v Okanagan Halfway House Society, 2018 BCSC 992, where the employer had reversed course once concerns were raised; here, the Employer never did.

On the notice period, the court weighed the Bardal factors and found Yakubow's twenty years of service favoured a longer notice period while his age of 45 favoured a shorter one, treating the nature of his position and the availability of alternative work as neutral; it fixed reasonable notice at 15 months. Damages were calculated from Yakubow's base salary of $103,500 per year, a three-year average bonus of $6,000 per year, and a 10% benefits allowance, producing total monthly compensation of $9,987.50. The court rejected the Employer's mitigation defence, finding its evidence of comparable available jobs too vague to meet its burden, and declined to deduct Yakubow's hockey-refereeing income because he had earned similar income while still employed. Aggravated damages were refused because Crosty's pressure, although improper, did not amount to the bad-faith conduct described in Honda Canada Inc v Keays, 2008 SCC 39, or Merrill Lynch Canada Inc v Soost, 2010 ABCA 251.

In the companion ruling on interest and costs, the court adopted the midpoint approach to prejudgment interest endorsed by the Alberta Court of Appeal in Christianson v North Hill News Inc, 1993 ABCA 232, over the lump-sum and installment approaches urged by the parties, setting the interest start date at September 10, 2023 — the midpoint of the notice period. On costs, the court declined to award double costs, finding that Yakubow's formal settlement offer of $180,000 exceeded the $149,812.50 judgment and therefore did not satisfy Rule 4.29's requirement that the offering party beat its own offer. It similarly rejected Yakubow's argument that the Employer's litigation conduct justified enhanced costs, noting the Employer was entitled to defend the claim and that the matter proceeded as an efficient, one-day streamlined trial. The court reduced the Schedule C tariff for trial preparation by 50% given the trial's relative simplicity, while allowing a separate $1,000 item for preparing the agreed statement of facts despite that step's absence from the Schedule C tariff.

Ruling and overall outcome

Yakubow succeeded on his central claim, with the court finding he had been constructively dismissed and awarding him judgment of $149,812.50, representing 15 months' pay in lieu of notice, while dismissing his claim for aggravated damages. In the follow-up ruling, the court ordered the Employer to pay prejudgment interest calculated from September 10, 2023, and fixed costs and disbursements payable to Yakubow, based on Column 2 of Schedule C with the trial-preparation adjustment described above, at $25,984.11.