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Constructive Dismissal

The result is that a significant change to the terms of employment without the reasonable notice dictated by the employee’s age, level of responsibility and seniority is a constructive dismissal. The employee can refuse the change, leave, and sue for pay in lieu of notice.

There is no caveat like “unless the employer has a good reason for the change”.  Lori worked for a company in Toronto from 1982 to 1992 when she moved to Waterloo and resigned her employment because it was too long a commute.

A few years later the vice president of the company called her to see if she would do a six-month contract and she did. At the end of the contract she was offered full-time employment but would only accept it if she could work three days a week from home. She was a good employee and the company made the deal.

22 years later Lori was still working three days a week from home and two days a week in Vaughan. On those two days she drove 110 km each way, paid a 407 bill and spent three hours each day in the car. The company also took away some of her management responsibilities, changed a lot of her work and cut her bonus. At the beginning of the week these changes were to take effect, Lori skipped the drive and resigned. Soon after she sued for wrongful dismissal.

That vice president who had negotiated Lori’s deal 22 years before gave evidence that he knew at the time she would never accept the job if it was five days a week in Vaughan. Lori won her lawsuit and was awarded 22 months’ pay in lieu of notice. The change in location was the driving force behind the judge’ decision but the other changes only added insult to injury. The fact that the changes were part of a company wide restructuring did not matter.

Roy worked for a media company for 21 years as an account executive selling newspaper advertisements. One day he was given a letter of reprimand criticizing his performance and telling him he was being put in a new job. He would now sell printing services and promotional products. This was an entirely different client base for Roy but for seven weeks he gave it a try. The employer projected that Roy could make close to as much as he had in his old job but those seven weeks taught Roy that that was simply not going to happen. A major client had been lost through no fault of his and three major potential purchasers already had well-established relationships with competitors. No matter how Roy did the calculation it was clear to him that his income was going to drop over 25%. The employer had guaranteed his old income for the first six months but once Roy saw the writing on the wall he resigned and sued for constructive dismissal.

Based on a Supreme Court of Canada decision, the employer argued that Roy should have mitigated his damages by staying on and making what money he could. It was open to him to sue for the difference over a reasonable notice period.

The judge found, however, that the Supreme Court of Canada case and every case that followed it did not involve a significant reduction in income. The judge found that Roy had the right to refuse the continued employment and awarded him 16 months’ pay in lieu of notice.

A constructive dismissal is a termination where nobody says, “You’re fired.” If the employee succeeds with their claim, they get the pay in lieu of notice they would have received if those words had been said. Unfortunately, they have to fight harder.
 
Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees. You can find him also published in the Hamilton Spectator.
 
Ed Canning
Ed Canning
P: 905.572.5809
ecanning@rossmcbride.com