Move to non-supervisory position amounted to demotion without proper disciplinary procedure: Court
Deconstructing a forced transfer
Constructive dismissal takes place when an employer unilaterally changes the fundamental terms and conditions of the employment contract. Is a transfer of a manager to a non-supervisory position for disciplinary reasons such a change? It can be, especially if the new position is considered below the employee’s existing position and the employer doesn’t follow its disciplinary policy. Even if the employer puts a positive spin on things.
When National Bank of Canada received complaints from several employees about bullying behaviour by a senior manager, it thought it would be prudent to move him to another executive position without supervisory duties. However, the senior manager didn’t want to move and the change turned out to be a constructive dismissal, putting the bank on the hook for more than a year’s pay in lieu of notice for the manager.
Adrian Chandran, 45, joined the Montreal-based financial institution in 1989 as an account trainee and worked his way up through various positions, finally becoming a senior manager in National Bank’s Vaughn, Ont., commercial centre in 2006. Throughout his tenure with National Bank, Chandran received consistently excellent performance reviews, including the highest level rating.
In 2007, the bank wanted to improve employee morale at the Vaughn commercial centre, as it was aware of problems in that area. The manager of human resources was tasked with conducting an employee satisfaction survey to determine what the bank’s problems and strengths were. The survey involved the HR manager interviewing employees one-on-one.
Employee survey revealed bullying issue with senior manager
During the survey, nine different employees made unsolicited comments to the HR manager that Chandran engaged in bullying behaviour in the office, including condescending remarks, volatile behaviour and embarrassing employees in front of others. Some of these employees indicated they might seek legal advice.
The HR manager reported these comments to Chandran’s direct superior at the bank, a vice-president, who felt Chandran should be removed from his position to another job where he wouldn’t have supervisory duties. On Aug. 27, 2007, he met with Chandran and informed him of the general allegations, though he didn’t discuss who made them or any specifics.
Chandran was shocked and wanted more details so he could defend himself against the charges, but he was denied further details. The vice-president felt he had enough information on the nature of the allegations for him to respond and on Sept. 5, 2007, issued a disciplinary letter to Chandran. The vice-president also decided to remove Chandran’s supervisory duties and transfer him to one of two other positions.
The bank valued Chandran as an employee, so it had searched for positions that were similar in level and pay that it felt would keep him on his career path within the organization. It came up with manager of business development/special projects — a newly created position — and manager of national accounts. The former position reported to the same vice-president and the latter to another executive who got along well with Chandran. The bank maintained there would be no loss of prestige or pay with either position and he would still be able to follow his career path to his stated objective — a vice-president position. In both positions, Chandran’s salary would remain the same for 14 months with a similar target bonus. The business development position would be evaluated at the end of the 14-month period, while the national accounts position would revert to its regular job rating, a pay level below Chandran’s current position.
The disciplinary letter outlined the bullying behaviour Chandran had been accused of and stated that he didn’t take responsibility for it. It went on to state that he would be transferred to his choice of one of the two indicated positions and any further bullying behaviour would result in his termination without cause.
New positions were a demotion: Employee
Chandran didn’t accept the transfer and filed a claim for constructive dismissal. He claimed both jobs were demotions and he would experience a loss of prestige and damage to his career path in the organization, which fundamentally changed the employment relationship. He also argued the disciplinary letter was essentially a final warning and its language effectively put him on probation, contrary to the bank’s policy of progressive discipline — the policy normally followed a process involving a verbal warning and two written warnings before termination of employment. As an 18-year employee with many positive performance reviews, this caused him to lose his trust in the bank, Chandran said.
The bank pointed out Chandran’s employment contract, which he had signed when he started working for it, stated he agreed to hold “any other subsequent position at such places designated by management.” It also claimed it had no obligation to launch an investigation because there was no formal complaint filed and supervisory duties were not a fundamental term of Chandran’s employment contract.
The Ontario Superior Court of Justice noted the objective test for constructive dismissal, established by the Supreme Court of Canada in 1997, involved the determination of whether “a reasonable person would have felt in the circumstances that the essential terms of the employment contract were being substantially changed.”
The court agreed with Chandran’s claim that the transfer would have a serious impact on his future employment at National Bank. The bank’s claim that his upward movement wouldn’t be affected wasn’t realistic, since he lost supervisor duties and, even though his pay and bonuses would initially stay the same, the 14-month limit before evaluation showed the positions were below Chandran’s level as a senior manager. This meant the transfer was effectively a demotion, the court found.
The court also found a reasonable person in Chandran’s position would conclude that the essential terms and conditions of the employment contract were being substantially changed, since he “was an 18-year employee with extremely positive performance appraisals set on a course of continuous promotions who suddenly became an employee who was guilty of very serious conduct in the violation of two very important policies of the bank.” The discipline — combined with the changes in his duties —amounted to a constructive dismissal, said the court.
“Mr. Chandran testified that he has lost all trust in the bank to deal with him in a fair and professional manner,” said the court. “I find that the actions of the bank in reaching such serious findings of misconduct, the imposition of discipline and the mandatory transfer to alternate positions (with lesser terms and conditions of employment) goes to the root of the employment contract and is a fundamental breach of the employment agreement, which constitutes a constructive dismissal.”
Employment relationship too damaged for employee to accept offer: Court
The bank also claimed that, if it was a constructive dismissal, Chandran didn’t mitigate his losses by accepting one of the offered positions with the bank. Because he got along with his proposed superiors and the bank was ready to paint the transfer in a positive way to reflect well on Chandran, it claimed he would be in a good working environment had he accepted one of the jobs.
However, the court found that since Chandran had already lost trust in National Bank because of its actions in the constructive dismissal, being forced to accept an inferior position and the discipline letter that “clearly indicated the intent of the bank with respect to Mr. Chandran’s future employment,” the employment relationship was too damaged to expect Chandran to continue with it. Therefore he had no positive duty to accept the offers.
The court found the reasonable notice for Chandran was 14 months, the amount of time it took him to find a comparable position with the Bank of Montreal. There was no bonus entitlement because National Bank had a clear policy stating employees must be employed by the bank both at the end of the fiscal year (October) and when the bonus is paid in January.
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