Employee wins back unilateral pay cuts (Legal view)

By staying on the job, employee was mitigating his losses
By Daniel Lublin
|Canadian HR Reporter|Last Updated: 01/14/2011

With a new company president poised to reduce operating costs, Lorenzo Russo saw the writing on the wall. As the long-time warehouse manager at Toronto-based candy manufacturer Kerr Bros., Russo was paid more than $100,000, a salary considered excessive by his new boss.

Russo was a “lifer” at Kerr after 37 years at the company, so changing his salary was no easy task for company president Fayez Zakaria. However, Zakaria claimed pay cuts were needed to keep the company operating. He felt the salaries for all of the employees were more than what was competitive in the marketplace and certainly more than the company could afford. Therefore, in April 2009, he asked all employees to take a 10-per-cent pay cut and notified them the company pension plan would be dissolved.

After the first round of pay cuts, Zakaria determined additional changes were required. He singled out four employees, including Russo, he felt should have further reductions to their pay. Zakaria told Russo he must take a further pay cut amounting to almost one-half his previous salary. He also confirmed Russo’s annual bonus of $30,000 would not be paid in the future. When Russo refused, his salary was reduced anyway from $85,000 to $60,000.