The more things change...

Simply giving notice of fundamental job changes probably isn’t enough

By Jeffrey R. Smith

What is the best way for an employer to approach significant changes to an employee’s job duties, status or pay?

These are all fundamental aspects of an employment contract and therefore a change to any of them without an employee’s consent raises the risk of a constructive dismissal claim. So how does an employer go about making such changes if it needs to do so? Typically, changes that have been found to be significant enough to constitute constructive dismissal deal with things like demotions, pay cuts of more than 10 per cent, location changes of considerable distance, poor treatment and major changes to the normal working environment that have a negative effect on the employee.

It’s often been believed that in order to implement such changes, employers must give reasonable notice similar to that for termination. This idea was supported by the Ontario Superior Court of Justice in the well-known case of Wronko v. Western Inventory Service Ltd., which determined an employer could make a change to a termination provision in an employment contract with sufficient notice — in this case 24 months.

However, the Ontario Court of Appeal found, if the employee objected, giving such notice was in fact a notice of termination and the employee had the option of continuing under the new terms at the end of the notice period. As a result, the employer should have informed the employee (Wronko) of his choice to either accept the termination of the original employment contract or continue under the new one.

In the former situation, the notice would amount to notice of dismissal. Recently, the Ontario Superior Court of Justice dealt with a class action suit against Allstate Insurance Company where several sales agents complained about the company’s change in pay structure and office setup. Though the company gave two years’ notice of the changes, most of the agents resigned, claiming the fundamental changes amounted to constructive dismissal and they were entitled to termination and severance pay.

However, the court dismissed the class action, finding the effects of the changes had to be assessed on an individual basis as each agent’s employment conditions were different.   So if the Allstate agents didn’t have a common issue to be tried, it goes back to the question of whether unilateral changes can be made in the first place while keeping the employee under the otherwise same contract. If not, as indicated in Wronko, why wouldn’t this be a common issue in the Allstate case?

Where does this leave employers who want to make significant changes to an employee’s job? It might not be possible without the employee’s consent and still maintain the employment relationship as it is. Is it possible to make such changes without avoiding actual termination of the employment contract?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. For more information, visit www.employmentlawtoday.com.

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