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Should public workers’ compensation protect clients from liability for mental stress caused by harassment?

August 23, 2021   by Greg Meckbach

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Ontario’s workers’ compensation tribunal was wrong when it decided that a Niagara Falls hotel can’t be sued by a former worker who alleges she was forced to quit after suffering harassment, the provincial Divisional Court has ruled.

As a result of Morningstar v. WSIAT, released Aug. 18, a constructive dismissal lawsuit against the hotel can proceed.

Ontario employers are generally immune from tort claims from workers injured on the job. But when workers claim their employment conditions forced them to quit, this would give rise to a breach-of-contract claim.

In the Morningstar case, the plaintiff alleges she suffered abuse, bullying and harassment to the point that she had to take sick leave and quit her Niagara Falls hotel job. Allegations against the employer have not been proven in court.

Originally the Workplace Safety and Insurance Appeals Tribunal (WSIAT) ruled the plaintiff is actually alleging she was injured on the job and therefore her only avenue to compensation is to file a Workplace Safety Insurance Board (WSIB) claim.

WSIB is a government-run workers compensation insurance fund. When the Ontario government established WSIB in the early 1900s, it created a  “historic tradeoff” that protects employers against lawsuits for work-related injuries while employees can claim benefits for work-related injury or disease without having to prove their employer was at fault.

Pretty much every provincially-regulated employer must pay premiums into WSIB. (Exceptions include federally-regulated industries such as airlines, railways, banks and telecommunications). Canada’s other provinces have similar schemes protecting employers from lawsuits arising from workplace injury.

If a worker does sue an employer, and that employer pays WSIB premiums, the employer can ask WSIAT to rule on whether the lawsuit is barred by the historic tradeoff. This is what happened after the former housekeeping supervisor quit her job in 2018 in Niagara Falls.

Now the Divisional Court has overturned the WSIAT decision, paving the way for a constructive dismissal lawsuit to proceed.

The Aug. 18, 2021 Divisional Court ruling is not on the merits of the lawsuit against the Niagara hotel. Instead,  it was merely a judicial review of the WSIAT decision that would have thrown the constructive dismissal lawsuit against the hotel out of court.

Under Ontario’s Workplace Safety and Insurance Act, chronic or traumatic mental stress is a type of injury.

But the Workplace Safety and Insurance Act offers no means of compensating claims for constructive dismissal, Justice Alexander Kurke wrote for the three-judge Divisional Court panel in its unanimous ruling.

A worker can sue for constructive dismissal if the employer’s treatment of a worker makes the employee’s continued employment “objectively intolerable,” Justice Kurke wrote.

This is due to an implied contract requiring an employer to treat workers with civility, decency, respect and dignity or that the work atmosphere will be conducive to the well-being of its employees.

Provided that a plaintiff is not improperly filing a constructive dismissal lawsuit to get around the historic trade-off of no-fault workers compensation coverage, then a constructive dismissal lawsuit should be permitted to proceed in Ontario “even where tort aspects of a claim are barred,” wrote Justice Kurke.

Unlike a typical personal injury lawsuit, a constructive dismissal lawsuit is a breach-of-contract case, rather than a tort case.

The Divisional Court cited numerous previous WSIAT rulings, some of which allowed lawsuits to proceed while others barred lawsuits. In one, an injured worker tried to sue his employer for breach of contract, alleging his employer breached its implied contractual duty to train him properly so as not to have an accident. That lawsuit was barred.

In Morningstar, the WSIAT noted that the former housekeeping supervisor’s lawsuit, for constructive dismissal, is based on allegations she was bullied and harassed severely enough to force her to take sick leave and resign. The allegations, if proven, are “inextricably linked” to claim for workplace injury with WSIB, the WSIAT ruled.

But the Divisional Court found that in the Morningstar case, WSIAT applied that “inextricably linked” test incorrectly.

There were actually two separate WSIAT rulings, both of which had the same outcome. The second ruling was a review, by a different vice-chair, of the first ruling.

The Divisional Court could have sent the Morningstar matter back to WSIAT for a second review but declined to do so.

“No purpose would be served in sending this matter back to a tribunal which twice arrived at or upheld the unreasonable conclusions that justify this review. The applicant brought suit more than three years ago, and her allegations relate to conduct that began more than five years ago. Given the substantial delay in the proceeding to this point, the mounting costs, and the need for both parties to collect and present evidence for the litigation, fairness dictates that the suit finally proceed without further avoidable delays,” Divisional Court Justice Kurke wrote.

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