Employee refused new position with similar pay and responsibility after restructuring, despite having changed positions before
Walking the line of constructive dismissal
The reality of doing business in a changing economic climate can mean companies sometimes have to make changes quickly to meet their needs and stay afloat. These changes can be relatively minor or something major such as a restructuring, which can involve moving employees around. But when employees are moved around, their jobs can change, which raises the spectre of constructive dismissal.
Employment lawyer Lorenzo Lisi examines a recent British Columbia case that showed employers should be allowed to make certain changes to employees’ positions, and where it fits in the context of defining the line of what constitutes constructive dismissal.
The pace of business moves very quickly and Canadian employers are often forced to make changes quickly and with very short notice. This is a fact of life in the new economy and often necessary to compete and survive. But there are rules and the law has adapted to deal with the situation where an employer seeks to make a change to a “fundamental” element of an employee’s contract of employment without notice.
The legal concept of “constructive dismissal” is not new. It was perhaps defined best by the Supreme Court of Canada in its 1997 decision in Farber c. Royal Trust Co., as follows: “A constructive dismissal occurs where an employer makes a unilateral and fundamental change to a term and condition of the employment contract without providing reasonable notice of that change to the employee.”
When this type of change occurs in the employment relationship, an employee is entitled to treat her employment as “constructively terminated,” which in turn will require that the employer provide reasonable notice of the fundamental change, or pay in lieu of that notice. The factors considered in determining the length of the notice are the same as if the employer were terminating the employee on a without-cause basis (age, service, position, remuneration).
Some changes can be made
However, not every change in employment constitutes a constructive dismissal. For example, while a decision by an employer to change an employee’s position from vice-president to receptionist, would almost certainly be considered a constructive dismissal, the loss of an employee’s parking spot would not.
The test in determining if a constructive dismissal has occurred is an objective one. The inquiry focuses on determining the elements of the contract between the parties at the time of hire, how such terms may have evolved, whether there has been any breach and finally, if that breach was fundamental to the employment relationship.
An interesting example of a court’s assessment as to whether or not a change in position constituted a constructive dismissal can be found in the recent case of Meyers v. Chevron Canada Limited, which was decided by the Supreme Court of British Columbia.
Warren Meyers was hired by Chevron Canada as part of its information technology (IT) department in November 1994. As of July 31, 2010, the date on which his employment ceased, he was the Applications Development Team Lead. He was 45 years old.
During his employment, there were changes to Meyers’s job within the IT department, some of which were lateral and not characterized as promotions.
In 2010, in response to the downturn in the global economy, Chevron implemented a restructuring process for its business which included the IT department. This resulted in not only a reduction of certain personnel and reporting relationships, but also centralized the company’s IT services in Canada.
To implement the restructuring, Chevron used a systematic “top down” job replacement framework, where new positions in the restructured organization would be offered to employees based on their pay scale groups. The process itself was complicated but involved considerable input from the employees.
Meyers was offered a position which was equivalent in scope and salary to his previous position, but changed the manner in which he would perform his job, the reporting structure and the overall nature of the IT function within the company. Meyers reviewed the offer and advised Chevron that, despite the fact his remuneration did not change, he could not accept the offer. Instead, he alleged he had been constructively dismissed, which in turn entitled him to receive a severance compensation package.
Chevron responded by advising Meyers the position offered was at the same salary and grade level as his previous position. It also pointed out that at law, Meyers was under an obligation to mitigate his damages and accept the job, even if the position were substantially different from his previous position and resulted in his constructive dismissal. Chevron urged him to reconsider, accept the offer and maintain his employment with Chevron.
Meyers declined to do so and sued for notice of the constructive termination of his employment.
In assessing whether or not there had been a fundamental and unilateral change to the employment relationship between Chevron and Meyers, the court held that Meyers had failed to establish he had been constructively dismissed.
The court made some interesting comments on the applicability of the concept of constructive dismissal, where an employee is hired to perform a specific position as opposed to those hired on the understanding they would likely change positions during their employment. On this point, the court stated:
“I am not satisfied that there should be a term implied to Mr. Meyers’ employment contract preventing Chevron from varying the subject matter of (his) management responsibilities. In my view, the evidence does not support the view that the parties contemplated that Mr. Meyers’ role was so rigidly defined. As noted above, Mr. Meyers’ supervisory role had diminished over time. An employer requires some latitude to structure the affairs of its operation, and such an inflexible term which shift the balance too far in favour in the employee.”
The breaches alleged by Meyers were not found to go to the “root of the contract.” In fact, the court found he would continue to assume many of his former responsibilities and was offered one of the senior positions in a significantly downsized operation — and he was viewed as a valued employee.
The court went so far as to say that even if a term was implied that his job responsibilities could not be slightly altered, the breach of the term in the circumstances of the case would not be serious enough or of a nature to constitute repudiation of the employment contract by Chevron.
And, finally, the court found Meyers acted hastily and resigned his position without determining whether or not his concerns regarding the job offered would be borne out.
Drawing the line for employers
The Meyers case is compelling for a number of reasons.
First, there appears to be an explicit recognition by the court of the ability to restructure the role of an employee where the history of the position suggests lateral movement was both permitted and relatively common. Second, from an evidentiary perspective, the court took great care to examine the nature of the restructuring and impact on the position and duties going forward. And finally, the fact Meyers resigned and did not even attempt to work in the new position undermined his ability to demonstrate that the restructuring resulted in a unilateral and fundamental change to his employment contract.
For more information see:
•Farber c. Royal Trust Co., 1996 CarswellQue 1158 (S.C.C.).
•Meyers v. Chevron Canada Limited, 2013 CarswellBC 665 (B.C. S.C.).
