In Yakubow v Edmonton Granite Memorials Ltd, 2026 ABKB 360, the Alberta Court of King’s Bench determined that an employer can constructively dismiss an employee before a new contract is actually imposed, where the employer’s communications make materially worse future terms effectively mandatory and non-negotiable. In Yakubow, the proposed agreement would have changed the employee’s title and duties, formalized and altered his bonus structure, imposed non-competition and non-solicitation clauses, and reduced termination entitlements to Employment Standards Code minimums. The Court treated the employer’s insistence on those terms as an anticipatory breach of the existing unwritten contract.
The decision can be understood as an application of the second branch of the constructive dismissal framework from Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10. Under Potter, constructive dismissal can arise not only from a unilateral substantial breach of a contractual term, but also where the employer’s conduct, viewed in all the circumstances, would lead a reasonable person to conclude that the employer no longer intends to be bound by the contract. The employee does not need to identify an already-implemented substantial change if the employer’s course of conduct itself objectively evinces repudiation. The Supreme Court has also described constructive dismissal as potentially arising from a series of events over time, rather than only from a single completed act.
That is precisely why Yakubow matters for Calgary employees. The new contract had not yet been put into effect, and the employer argued that the terms were merely proposed or negotiable. But the Court rejected that framing because the operative legal question under Potter’s second branch was not whether the altered terms had already bitten; it was whether the employer’s conduct objectively communicated that the old employment agreement was over and that the employee had to accept the new one.
Why the employer’s conduct crossed the line
The Court focused on the intensity, speed, and finality of the employer’s conduct. The contract was presented on a Friday with an expectation of acceptance by Monday. During the following days, the employer repeatedly emphasized that the form of the contract, including the restrictive covenants and termination clause, was required. The Court further found there was no evidence that the employer changed course after the employee raised concerns; instead, every communication reinforced that the new terms were required going forward and were effectively final.
The legal significance of those facts is that the Court treated the employer’s insistence as a repudiatory election for the future. Put differently, the employer did not merely invite negotiation about a revised agreement; it conveyed that the employee’s continuing employment would be governed by materially less favourable terms going forward. That is why the case is more accurately characterized as an anticipatory or future-oriented repudiation than as a typical “implemented unilateral change” case. The Court’s reasoning therefore fits comfortably within Potter’s broader rule that constructive dismissal can be established where the employer’s conduct, cumulatively and objectively assessed, shows an intention not to remain bound by the existing contract.
A further point of principle is that the proposed changes were not trivial; they struck at several core incidents of the employment relationship: job content, variable compensation, post-employment restraints, and termination entitlements. In Alberta, the Employment Standards Code sets only the statutory floor for termination notice or pay, not the common-law notice period. So a demand that an employee surrender common-law rights and accept only Code minimums can be a materially adverse alteration of the existing employment agreement.
Mitigation and the hockey-refereeing income
The mitigation reasoning appears to be equally important. The Court relied on Brake v PJ-M2R Restaurant Inc, 2017 ONCA 402 for the rule that post-breach earnings are deductible only where the mitigation performance and the performance under the original contract are mutually exclusive — that is, where the new earnings are a genuine substitute for the lost job income. Brake applied that principle to side income the employee could have continued to earn while still working for the dismissed employer.
Applied to Yakubow, that means the refereeing income was not treated as classic mitigation income merely because it was earned during the notice period. The employee had already been refereeing hockey while still employed at the employer. Although he was able to referee more games after leaving, the Court declined to deduct that income because it was not a direct replacement for his full-time employment earnings. The governing principle is therefore one of substitutability, not bare chronology: income earned during the notice period is not automatically deductible unless it truly replaces the lost employment income.
Applicable principles for Calgary Employees
The case stands for three practical propositions that should be of interest to Calgary employees:
- First, an employer who wants to introduce a materially less favourable contract cannot safely proceed by presenting it as mandatory and final on short notice. Absent fresh consideration or a properly structured change process, that conduct may itself constitute constructive dismissal.
- Second, an employee does not always have wait for the formal implementation of the new terms if the employer has already made it clear that the existing contract will no longer govern.
- Third, on mitigation, Alberta courts may focus closely on whether collateral income is a true substitute for the lost employment, which may protect pre-existing side-gig income from deduction even when it increases after dismissal.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018 and Evolution Legal in 2026.
FAQs
1.Can an employer constructively dismiss an employee before a new contract is actually implemented?
Yes. Constructive dismissal can occur before the new terms formally take effect if the employer’s conduct objectively shows that the existing employment agreement will no longer govern and that materially worse terms are effectively mandatory.
2. Why did the Court find the employer’s conduct amounted to constructive dismissal?
The Court focused on the employer’s repeated insistence that the new contract was required, non-negotiable, and had to be accepted on short notice. Viewed objectively, the communications signaled that the employer no longer intended to remain bound by the existing contract.
3. What legal test did the Court apply?
The Court applied the second branch of the constructive dismissal framework from Potter v New Brunswick Legal Aid Services Commission. Under that framework, constructive dismissal can arise where the employer’s conduct would cause a reasonable person to conclude the employer no longer intends to honour the employment contract.
4. Why were the proposed contract changes considered significant?
The proposed changes affected several core aspects of the employment relationship, including:
- job duties and title;
- bonus compensation;
- non-competition and non-solicitation obligations; and
- termination entitlements reduced to Employment Standards Code minimums.
The Court treated these as materially adverse changes to the employee’s existing rights.
5. Does side-gig income always reduce wrongful dismissal damages?
No. The Court confirmed that post-dismissal income is only deductible if it is truly a substitute for the lost employment income. Because the employee had already been refereeing hockey while employed, the refereeing income was not treated as a replacement for his former full-time earnings.