Can a temporary job change lead to constructive dismissal?
Question: We have undertaken a new project on a trial basis which required an employee to take on some new responsibilities and add a job title to his existing one. Because we are unsure of how the project will go, the employee agreed to take on the new responsibilities for the same pay for an undetermined trial period. If the project continues indefinitely, is there a risk of a constructive dismissal claim if we don’t change the employee’s pay?
Answer: Constructive dismissal occurs when an employer makes a fundamental change to the employment contract without the agreement of the employee. Constructive dismissal requires a unilateral change imposed by the employer and the change must fundamentally alter an essential term of the employment. The Supreme Court in Farber c. Royal Trust Co., described constructive dismissal as when an employee does not agree to fundamental changes to her job and subsequently leaves because the employer no longer meets the obligations of the employment contract.
Generally, the types of unilateral changes that trigger constructive dismissal are demotion, reduced pay, forced transfer or relocation, unilateral change in job responsibilities or reduced hours. These circumstances typically involve a reduction in salary or a change in an employee’s job description that results in lower responsibility or status.
The failure of an employer to award a raise would only constitute constructive dismissal if an employee can demonstrate that the promised raise forms an essential term of the employment contract. Randall Echlin and Jennifer Fantini in Quitting for Good Reason: The Law of Constructive Dismissal in Canada, state that:
“(A)n employee must demonstrate either that the parties agreed to an increase or that an increase was implied by the conduct of the parties, in order for an employer’s failure to award a raise to constitute a constructive dismissal. Where the plaintiff is unable to demonstrate that such an agreement existed, the failure to award an increase, or an increase in the amount expected by an employee, will not be considered a breach of the employment contract.”
Courts have rarely found constructive dismissal for the failure to award a raise. In Graham v. Bella Bella Community School Board, the employee had been promised a raise, but the amount had not been specifically agreed upon. The court found there was no constructive dismissal since a salary had not specifically been negotiated and incorporated into the employment agreement.
There are some circumstances where the failure to give an employee a promised raise constitutes constructive dismissal. For instance, in Provincial Partitions Inc. v. Ashcor Inplant Structures Ltd., the Ontario court found the employer breached the employment agreement by failing to provide the promised raise of $50 per week. The court stressed the unilateral nature of the change and the failure to give the employee adequate notice.
Accordingly, an employer can avoid the potential for constructive dismissal by providing the employee with reasonable notice of the change in the terms of their employment.
An employer can typically avoid a claim for constructive dismissal through a properly drafted employment agreement. Where an employee is not hired to perform a specific task or work in a specific area, then it would not constitute constructive dismissal to alter that employee’s job description if it was made clear at the time of hiring that the employee was not hired for specific duties. Where an employee takes on a new or temporary project it may be best to enter into a new employment agreement. If that employment agreement clearly specifies the project is temporary and that no raise is promised, the employee will not be able to claim that a raise was an essential term of the employment agreement. Problems can also be avoided be giving the employee adequate notice the project is ending or that no raise will be forthcoming. It is essential to clearly document the terms under which the employee is taking on the new project.
For more information see:
•Farber c. Royal Trust Co., 1996 CarswellQue 1158 (S.C.C.).
•Graham v. Bella Bella Community School Board, [1985] B.C.J. No. 1201
•Provincial Partitions Inc. v. Ashcor Inplant Structures Ltd., 1993 CarswellOnt 1119 (Ont. Gen. Div.).
