Executive Summary: Key Legal and Evidentiary Issues

• Whether the employment contract contained an express oral term permitting the respondent to work from home, and whether this constituted an essential term.
• Application of the two-branch Potter v. New Brunswick Legal Aid Services Commission test for constructive dismissal, including unilateral and substantial change to an essential term.
• Reasonableness of the respondent's mitigation efforts by pursuing entrepreneurial business ventures rather than seeking alternative employment.
• Evidentiary sufficiency of the appellant's proof that comparable employment was available, particularly where suggested positions required full-time in-office work.
• Appellate standards of review distinguishing questions of law (correctness), contract interpretation (mixed fact and law), and contract formation/mitigation (palpable and overriding error).
• Stay of execution analysis under the RJR-MacDonald tripartite test, including whether a joint tenancy interest in real property gives rise to a material risk of non-recovery amounting to irreparable harm.

Facts of the case

Tracy Parolin was employed by Cressey Construction Corporation ("Cressey"), a Vancouver-based real estate development and construction company, for 18 years. She began her career there in 2005 as a Development Manager and was promoted to Director of Marketing in April 2018. The terms of her employment were mostly oral, except for a job description outlining the Director of Marketing's role and responsibilities.

In June 2012, Ms. Parolin took maternity leave following the birth of twins, one of whom had a significant health issue. In April 2013, at the request of Cressey's Executive Vice President, Mr. Lammam, she returned to work early on a four-day-a-week schedule with flexibility in her working hours. Once her children started kindergarten in 2017, she was given flexibility to pick up and drop off her children five days a week, working approximately 8:45 a.m. to 2:15 p.m. From 2018 to 2021, she reported to Mr. Jason Turcotte, who regularly approved her flexible schedule.

At the onset of the COVID-19 pandemic in March 2020, Cressey employees began working from home. When other employees returned to the office a few months later, Ms. Parolin spoke with Mr. Turcotte about continuing to work from home due to health concerns regarding one of her children. He agreed. When Mr. Turcotte left Cressey in 2021, Ms. Parolin confirmed with Mr. Lammam that she could continue working from home, and he told her that as long as the work was getting done, the location did not matter. In June 2021, Mr. Lammam assisted Ms. Parolin in setting up her home office. In March 2023, Ms. Parolin transitioned to full-time hours from home, with her hours approved by Mr. Kendall, to whom she was then reporting.

On May 10, 2023, Ms. Parolin met with Mr. Kendall to discuss a pay increase she had been seeking since her promotion. Mr. Kendall advised her she would receive a salary increase of $1,400 a year, bringing her salary from $93,600 to $95,000, which was far below her expectation of $130,000. He justified this on the basis that her role was more akin to a Marketing Manager position than a Director of Marketing position. Mr. Kendall also directed her to return to in-office full-time work, Monday to Friday from 9:00 a.m. to 5:00 p.m. There was evidence at trial that Marketing Directors at two other companies were being paid over $125,000. Ms. Parolin considered herself constructively dismissed, and her last day of work was May 17, 2023.

Following her departure, Ms. Parolin did not seek alternative employment. Instead, she pursued several business ventures. She first registered Sova Homes in July 2023 to develop small residential properties. In November 2023, she incorporated Maro Design to develop an AI-based interior design product, but paused this venture after concluding the necessary technology was not advanced enough. She then began a third project, Tech Safe Kids, an interactive learning platform for young people focused on cell phone e-safety, digital etiquette, and online security, which was accepted in November 2024 into a program at the Centre for Digital Media to build the platform prototype at a significantly reduced cost.

Trial decision

In written reasons indexed as 2025 BCSC 741, the trial judge found that Ms. Parolin's flexible work hours and work location were oral terms of her employment contract that could only be changed with reasonable discussion and/or notice. The judge held that the combined effect of the direction to return to the office without notice, the small salary increase, and Mr. Kendall's reference to a Marketing Manager position established, in effect, a demotion. This demotion, along with the unilateral change in essential terms of her employment contract, was sufficient to establish a breach of her employment contract and constructive dismissal.

The judge determined Ms. Parolin was entitled to 19 months' pay in lieu of reasonable notice, considering her age (55), her 18-year work history at Cressey, and her role as a director. The judge concluded Ms. Parolin had not failed to mitigate her loss and declined to award punitive damages, finding the conduct was not "sufficiently egregious" to warrant such an award.

Stay application — 2025 BCCA 255

Cressey applied to the Court of Appeal for a stay of execution of the trial order pending its appeal. The application was heard by Justice Harris in Chambers on July 15, 2025, with judgment delivered on July 21, 2025. Cressey argued the appeal had merit based on alleged errors in the judge's interpretation of the unwritten employment contract and findings on mitigation. It submitted it would suffer irreparable harm because Ms. Parolin's financial situation posed a serious risk it would not be able to recover damages if successful on appeal, particularly noting her sole exigible asset was a property held in joint tenancy. Cressey proposed, in the alternative, a "Voth" order under which it would pay the damages award plus interest into trust pending the appeal.

Justice Harris applied the three-stage RJR-MacDonald test, focusing on the critical issue of irreparable harm. He noted it was undisputed that Ms. Parolin had an interest in joint tenancy in her family home, with substantial equity and an available line of credit very significantly in excess of the value of the judgment, giving her the financial ability to repay if the appeal succeeded. While he accepted that execution against a joint tenancy could be more complicated, expensive, and time-consuming than executing against a sole interest, he found the reasoning in Hardy v. Graham, 2023 BCCA 406, persuasive. He concluded Cressey had not established a risk of non-recovery rising to a sufficient degree of materiality to warrant a stay, declined to assume Ms. Parolin would defy a legal obligation to repay, and found the suggestion that execution proceedings would be necessary to be speculative. The application was dismissed, and Justice Harris also declined to make a Voth Order.

Appeal decision — 2026 BCCA 199

The substantive appeal was heard on January 16, 2026, before Chief Justice Marchand and Justices Fleming and Iyer, with judgment delivered on May 11, 2026. Cressey raised three grounds: that the judge erred in determining the terms of the employment contract, in finding Cressey breached the contract, and in finding Ms. Parolin had not failed to mitigate.

Terms of the employment contract

Chief Justice Marchand, writing for the Court, found Ms. Parolin's employment contract contained, at minimum, an express oral term permitting her to work from home. He held this was an essential term that could not be unilaterally changed without reasonable notice, citing Farber v. Royal Trust Co. and Potter. The parties' words and actions supported the trial judge's finding: Ms. Parolin sought permission to work from home, Cressey agreed, and she then worked from home for three full years. Fresh consideration was not required for this modification, and the term was sufficiently certain to be enforceable.

The Court found it unnecessary to address alleged errors related to the finding of a flexible work schedule term. While the judge had mistakenly used the word "imply" rather than "infer" at certain points, she was assessing the existence of an express oral term, not implied terms, and therefore did not err.

Breach of contract and constructive dismissal

The Court reviewed the legal principles from Potter, which sets out two branches for assessing constructive dismissal: a single unilateral act breaching an essential term sufficiently serious to constitute constructive dismissal, or a series of acts that cumulatively show the employer no longer intends to be bound.

Chief Justice Marchand held it was sufficient to recognize a breach under the first branch based on the direction to return to work without notice. Objectively, this was a unilateral change to an essential term, Ms. Parolin's contract did not permit Cressey to make this change without notice, and she did not consent or acquiesce. A reasonable person in her circumstances would have seen this as a substantial change. Her work-from-home arrangement allowed her to fulfil her childcare responsibilities and scale up her hours to full-time work, and a change without notice would have significantly impacted her ability to manage both responsibilities. The Court found a unilateral and substantial change to an essential term was sufficient on its own to ground constructive dismissal, and nothing turned on the trial judge's findings regarding demotion. The Court added that the conduct surrounding the May 10 meeting may also have supported constructive dismissal under the second branch of Potter.

Mitigation

The Court rejected Cressey's argument that the trial judge applied a subjective test, noting the judge cited the modified objective test from Forshaw v. Aluminex Extrusions Ltd. and asked what a reasonable person in the dismissed employee's position would do. The Court reviewed the legal principles, including that establishing a business is a recognized form of mitigation, citing Peet v. Babcock & Wilcox Industries Ltd. and other authorities, and that there is "no magic formula" for reasonable mitigation efforts.

Cressey's reliance on Hart v. EM Plastic & Electric Products Ltd. and Nevin v. British Columbia Hazardous Waste Management Corp. was rejected, as those cases did not establish a rule requiring a wrongfully dismissed employee to first seek alternative employment before starting a business. Considering Ms. Parolin's extensive experience in the development sector, her fulsome efforts, and the circumstances of her dismissal, it was open to the judge to conclude her mitigation efforts were reasonable. The Court also found Cressey failed to demonstrate Ms. Parolin could have obtained comparable employment, as the positions Cressey identified at Mosaic Homes and Anthem Properties required primarily in-office work and were therefore not comparable, given that the unilateral breach of the work-from-home term was what constituted her constructive dismissal.

Outcome

The successful party in both decisions was the respondent, Tracy Parolin. In 2025 BCCA 255, Cressey's application for a stay of execution was dismissed. In 2026 BCCA 199, Cressey's appeal of the trial decision was dismissed, leaving the trial judge's award of 19 months' pay in lieu of reasonable notice intact. The exact total monetary award, costs, and damages granted in favour of Ms. Parolin cannot be determined from the two appellate decisions provided, as the specific dollar figure for the damages award is not stated in either decision.