A recent decision from the Ontario Divisional Court (the “Court”), Morningstar v. WSIAT, has partially overturned Decision No. 1227/19 of the Workplace Safety and Insurance Appeals Tribunal (the “WSIAT”) on judicial review,  permitting a worker to sue for constructive dismissal and related aggravated, moral and punitive damages, despite the worker being entitled to receive benefits under the Workplace Safety and Insurance Act (“WSIA”).

Under the WSIA, a worker is statutorily barred from bringing civil suits against their employer if the harm for which the worker is seeking damages is one which would entitle them to benefits under the WSIA. This is known as the “historic trade-off”: employers must participate in a regulated no-fault insurance scheme for workplace injuries, in exchange for which they are protected from civil liability.   

The WSIAT has long taken the position that an action for damages arising from wrongful dismissal, however, is not barred by the WSIA, on the basis that these are damages for breach of contract, rather than personal injury. However, with the more recent (2018) broadening of permissible claims related to workplace stress, questions have arisen regarding the limits of the statute bar against civil actions for constructive dismissal, where a worker alleges that:

• they have suffered injury due to workplace harassment (which can be a compensable claim under the WSIA s.13(4)); and
• that the employer’s actions relating to the workplace harassment have effectively repudiated employment contract, constituting a constructive dismissal.

In Decision No. 1227/19, the employer brought an application to the WSIAT, arguing that a worker’s right to sue was taken away. The worker had alleged that workplace harassment and the employer’s inadequate response had resulted in a constructive dismissal. The worker sued for damages under various headings, including the tort of harassment, constructive dismissal, and lost wages, as well as aggravated, moral and punitive damages.

The WSIAT determined that the worker’s civil action was barred because the action amounted to a claim for injury resulting from workplace harassment, an injury for which workers’ compensation benefits are available. The Vice Chair further reasoned that the claims pertaining to the injury and the constructive dismissal were “inextricably linked factually and are not separate and remote” The worker then sought a reconsideration in Decision No. 1227/19R, in which a different Vice Chair of the WSIAT upheld the initial decision. The worker then applied to the Court for judicial review.

It is important to note that, on judicial review, the worker conceded that the WSIA properlybarred her original claims relating to injury, including the tort of harassment and lost wages. However, the worker asserted that the WSIAT erred in barring her claim for constructive dismissal and aggravated, moral and punitive damages relating to that claim.     

In the resulting decision, Morningstar v. WSIAT, the Court agreed with the worker, and partially quashed the WSIAT’s decisions. In reviewing the purpose of the historic trade-off, the Court determined that “it is reasonable to conclude that the lawsuits that are statute-barred are those for torts causing work-related injuries.” The Court also acknowledged the importance of protecting employers from civil actions purporting to be for reasons other than personal injury:

58. Nevertheless, the WSIAT must take care to ensure that the bargain struck in the historic trade-off is not undermined by attempts by workers to bring civil suit for workplace injury or to bypass the Act’s limits on benefits by disguising their claims for benefits as other forms of action. The purpose of the WSIAT in s.31 of the Act is to bar tort actions and also to root out tort claims that are disguised as other types of actions.

The Court also agreed with prior WSIAT jurisprudence that there may be exceptional cases in which a wrongful dismissal claim is statute-barred, “where the circumstances of the wrongful dismissal claim are inextricably linked to the work injury.” However, the Court noted that Canadian law permits different causes of action to be advanced on the same facts, and therefore it would be unreasonable to bar an action for constructive dismissal only for the reason that the same facts also incidentally support an action for personal injury. The Court concluded: “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 the tort aspects of a claim are barred.” Similarly, the Court found that the worker’s claims for aggravated, moral and punitive damages, as they pertain to the constructive dismissal, were not barred by statute. Accordingly, while the Court agreed that the tort of harassment claim (and other injury-related claims) was properly barred under s.31 of the WSIA, the worker’s civil action for constructive dismissal, and attendant damages, was permitted to proceed before the courts.   

While the Court’s decision is relatively supportive of the historic trade-off and the importance of protecting employers from personal injury claims, it nevertheless raises new questions as to when allegations of workplace harassment may provide a foundation for both workers’ compensation benefits and a civil action against the employer. Constructive dismissal claims pose particular challenges, requiring careful scrutiny of the timing of the alleged repudiation of the employment contract, as well as the employer’s conduct both prior to the alleged injury and its response (such as its participation in the return-to-work process, accommodation efforts, etc.),  In the present case, the Court did note that the essence of the worker’s constructive dismissal claim focused on the employer’s conduct that led to terminating the employment relationship, which is distinguishable from the conduct that caused the personal injury. However, it could also be said that the decision does not speak to the foreseeable conflict between claiming workers’ compensation benefits for loss of earnings, while also alleging that the employment relationship has been constructively terminated, arguably raising risks of “double recovery”, or a practical form of election between loss of earnings benefits under the WSIA, or pay in lieu of notice through the courts.        

If you have any questions about this topic or any other questions relating to workplace law, please do not hesitate to contact a Mathews Dinsdale lawyer.

The authors gratefully acknowledge the assistance of Anthony Kwong, an Articling Student in the Firm’s Toronto office.