Halifax newspaper unilaterally shifted account executive from its own ad sales to marketing its print products and sports apparel businesses
A Nova Scotia newspaper must pay damages equal to 16 months’ notice to a former employee of 21 years after its attempt to change his job duties and compensation resulted in a constructive dismissal, the Nova Scotia Supreme Court has ruled.
Calvin Clarke, 42, was an account executive with The Halifax Herald newspaper. He was originally hired in 1994 — his first job — and three years later became an account executive working with sales of print advertising for the newspaper and its related publications. His income was based on the percentage increase in the annual target, which was based on the previous year’s sales. As a result, his overall pay fluctuated somewhat from year to year.
Clarke went on paid sick leave in 2014 that lasted seven weeks and again from Jan. 1 to March 2, 2015. On his first day back at work in March 2015, he was informed he had a new position — that of business development specialist strengthening the Herald’s non-media product. This involved spending 75 per cent of his time working in sales for Bounty Print — the Herald’s print business that made products such as business cards and brochures — and 25 per cent of his time on Headline Promotions — the Herald’s promotional products business where he would sell sports uniforms and equipment.
This was part of the Herald’s plan to integrate its print ad sales with Bounty Print and Headline Promotions sales through bundling their products for clients as a response to declining print ad sales. It felt Clarke was well-suited to the business development specialist position because he had drive and was good at sales. In addition, the paper had received customer service complaints about Clarke and didn’t want to cause disruption for clients who had been working with others during Clarke’s sick leave.
The Herald set out projected sales targets for 2015 for both Bounty Print and Headline Promotions and Clarke’s compensation, which would involve a base salary of $24,000 per year plus percentages of sales for both ventures. He would also receive an annual bonus if budgets for both were met. The Herald also said it would provide guaranteed compensation pro-rated to an annual salary of $66,500 for three months to help with the transition to the new role.
Clarke was unprepared for this change, as he had previously had his clients returned to him when returning from sick leave. However, he agreed to follow the plan and prepared client lists for the two ventures.
However, Clarke experienced some difficulties in his preparations — Bounty Print customers weren’t interested in a marketing plan integrating Bounty Print products with the Herald and Headline Promotions products, and Headline Promotions prospects all had longstanding relationships with other suppliers. Clarke was also concerned with limited product lines for Headline Promotions. In addition, Bounty Print lost its second biggest client to a competitor, and its biggest client was the Herald itself, for which there were no commissions.
Clarke drew up scenarios for his income based on meeting and not meeting targets, with the maximum being similar to his income in recent years, but he considered it unattainable. He believed his most realistic income projection was $20,000 less than what he made in 2014 and almost $40,000 less than what he made in 2013.
Clarke told the Herald’s vice-president of sales that the projections for both ventures were unrealistic, so the vice-president of sales added commission sales from another employee to the list of those for whom Clarke would earn commission. However, this didn’t satisfy Clarke, so he retained counsel who wrote a letter to the Herald outlining Clarke’s concerns. The letter also stated that the “unilateral transfer to a junior position” could lead to a constructive dismissal claim and he would only accept the business development specialist position if it came with a base salary of $50,000 — more than twice what the Herald proposed.
The Herald rejected Clarke’s base salary proposal and offered to increase the pro-rated guaranteed salary period from three to six months, starting on April 13, with a meeting after four months to review Clarke’s progress. Clarke wasn’t happy and resigned from his position on April 23. He then began an action for constructive dismissal.
The Herald disputed Clarke’s assertion the new position was a demotion and a significant change, because it still involved marketing efforts, the same reporting structure and office, the same benefits, and the potential for similar or better compensation.
The court noted that there are two parts to the test to determine constructive dismissal: the express or implied term of the contract must be significantly breached, and would a reasonable person in the same situation as the employee feel that there was a substantial change to the terms of the employment contract.
The court found that while there was no written employment contract, it was not an implied term of the contract that Clarke could be unilaterally transferred from the account executive position that he had performed for 18 years to a newly created position. The transfer affected his compensation, duties, and responsibilities and met the first part of the test, said the court.
The court also found that Clarke’s duties changed from selling print ads in the newspaper and related publications to selling printing materials for Bounty Print and sports apparel and equipment for Headline Promotions. In addition, the court found Clarke’s projections for meeting targets more realistic than the Herald’s — given Bounty Print’s loss of a major client and the lack of sales history for Headline Promotions, which would result in lower compensation. A reasonable person in Clarke’s situation would find the “substantial changes to his compensation and the duties of his employment” to be constructive dismissal, said the court in upholding Clarke’s action.
The court noted that it wasn’t unreasonable for Clarke to resign his position given the circumstances and there were few opportunities to fit his skills and compensation requirements. As a result, there wasn’t a failure by Clarke to mitigate his damages, the court said.
The Herald was ordered to pay Clarke damages for 16 months’ notice, minus income Clarke received from other employment during the 16-months following the constructive dismissal, for a total of $77,761.87. See Clarke v. Halifax Herald Ltd., 2017 CarswellNS 964 (N.S. S.C.).
