Reversal of new employment standards changes seen as victory for employers, but rolling them back may not be easy for some
The employment standards changes that Ontario’s previous Liberal government enacted caused a lot of uproar and upheaval for employers in the province. And just when everyone was starting to adjust to the changes, the new Progressive Conservative government reversed many of these changes when it took power. The reversal is widely seen as positive for employer, but those who have already implemented the previous changes and their HR departments may face headaches if they want to go back to the way things were – including possible constructive dismissal claims.
Flexibility, operational nimbleness, efficiency, profit and productivity maximization — these are the hallmarks of today’s most successful organizations, and in particular those that challenge for business on a global scale. For employers, living and breathing those values means making difficult operating decisions, especially when it comes to competing in sectors that face cyclical swings in business.
To account for rapidly-shifting economic conditions or to capitalize on key opportunities, business owners, managers and HR professionals are more focused than ever before on deploying their human capital in innovative ways to achieve operational goals. Sometimes that means shifting talent to new positions, changing their terms of work or making other employment alterations that make sense for the company — asking an employee who has long worked flexible hours and multiple days a week from home to be in the office from 9-to-5, Monday through Friday, for example.
The trouble is when an organization makes a significant change to an employee’s terms of employment, the employer is potentially facing the risk that affected employees may assert that they have been constructively dismissed. A constructive dismissal occurs when an employer makes a single unilateral act that breaches an essential term of an employee’s employment contract, or commits a series of acts that, taken together, show that the employer no longer intends to be bound by the employment contract. Constructive dismissals frequently occur in the context where an employer changes an essential term of the employee’s employment contract: such as a reduction in the employee’s salary, a significant change in working hours, or a change in authority or position.
When making changes to the terms of a worker’s employment, employers have two principal options for implementing the changes. The first option is to obtain the employee’s consent and provide her with some form of consideration for the change (something of value exchanged in order to make a contract enforceable). This is the most friction-free option as the employee has agreed to the new terms and the consideration need not be large, so long as it is of value to the employee.
Common examples of consideration include increases in salary, increases in employment benefits, and extra vacation time. If the employee will not consent to the changes, the employer may resort to the second option, which is to provide reasonable notice that the existing employment contract will be terminated and the employee will be rehired under a new employment contract with new terms at the end of the notice period — as outlined in the seminal case Wronko v. Western Inventory Service Ltd. In doing this, the employee’s termination entitlements are triggered and, should the employee resign, the employer runs the risk of having to pay the employee her common law reasonable notice entitlement, or a termination entitlement otherwise stipulated by contract. Under this approach, the employer is severing the old employment relationship in order to begin a new one on terms it considers more favourable. The employee may then choose to remain with the company under the terms of the new agreement or depart for other employment.
Ontario’s employment standards flip creates risk
What many employers in Ontario may have overlooked in the past two months is that a recent ‘win’ for employers on the HR law front also introduced meaningful constructive dismissal risk for their organizations. How?
On Jan. 1, 2019, Bill 47, the Making Ontario Open for Business Act, 2018, ushered in a new era for employers in the province — and for many confusion, after having only just undergone a major overhaul of their workplace policies.
That piece of legislation reversed many of the labour and employment law changes introduced in Bill 148, The Fair Workplaces, Better Jobs Act, 2017, the much-maligned package of amendments introduced by the previous Liberal government that was intended to level the playing field between workers and employers in the province. The legislation — which did everything from increasing the minimum wage to providing employees with 10 personal emergency leave days, two of them paid — was detested by employers who argued that it delivered too much too fast, impaired their competitiveness, and impacted their ability to remain profitable.
Organizations that relied on minimum-wage labour were particularly hard hit — that was, until Bill 47 rolled back almost all of Bill 148’s most contentious amendments. Doug Ford’s Progressive Conservatives then proceeded to put an unceremonious pause on implementation of the equally unpopular Pay Transparency Act — the odds are good that the legislation, which would have required larger employers to publicize gender-based compensation gaps, list salary ranges in public job postings, and would have allowed employees to openly discuss their salaries, will eventually be scrapped altogether. The Tories also introduced Bill 66, the Restoring Ontario’s Competitiveness Act, 2018 that, when passed, will ease employee scheduling and overtime pay rules, among other important changes.
While Bill 47 was a clear victory for employers exhausted by so-called progressive amendments to the province’s Employment Standards Act, 2000 and Labour Relations Act, 1995, those that interpret the legislation as carte blanche to immediately roll back employee entitlements to pre-Bill 148 levels should think twice. Doing so could invite constructive dismissal claims because employees could reasonably argue that such a swift change in entitlements is tantamount to termination.
Wage rollback difficult
One employer group facing the most significant risk are those that had already increased their minimum hourly wage to $15 per hour to ensure future compliance with Bill 148, and who might attempt to roll it back to $14 now that Bill 47 has frozen the provincial minimum at the lower rate. Organizations that rely on a varied workforce are also exposed. Bill 148 introduced strict new employment status and equal pay for equal work provisions for part-time and temporary workers to ensure they would be paid the same as their permanent, full-time colleagues. Organizations that had already reworked their pay scales to comply with the new law, but then attempt to decrease those wages, are at risk.
No matter the situation, organizations should act now to amend their employee policies and procedures to reflect the changes contained in Bill 47. But they should also think strategically before taking action.
Those that moved forward in compliance with Bill 148 have the option of honouring those changes. Why? Put simply, rolling back entitlements can be a morale killer, can lead to spikes in employee disengagement and turnover, and can hinder an organization’s ability to attract and retain talent, particularly at a time of near-historic lows in unemployment. Even if they do decide to roll back wages, an employer could provide employees with extra paid vacation or personal days as a good-faith gesture. Doing so could help position as an employer of choice if the move is communicated effectively — “We’re not doing this because we have to, but because we value our employees and want to provide compensation that reflects their hard work and dedication to the ongoing success of the business” — and is perhaps leveraged as a greater package of employee-friendly initiatives.
Conversely, if employers elect not to roll back the Bill 148 entitlements, they may implement changes by obtaining consent from employees and providing consideration for the changes, or by severing the employment agreement with reasonable notice and entering into a new employment agreement, as outlined above.
With some creativity and a proactive approach, it’s entirely possible to turn potential constructive dismissal risk into an opportunity to attract, retain and engage workers. But employers are wise to remember that doing so takes a strategic plan that not only accounts for the flurry of recent employment law changes, but also the unique characteristics of the workplace in question.
For more information see:
• Wronko v. Western Inventory Service Ltd., 2008 CarswellOnt 2350 (Ont. C.A.).
Seth Holland is a lawyer at Williams HR Law in Markham, Ont., where he practices in all areas of management-side labour, employment, and human rights law. He can be reached at (905) 205-0496 or [email protected]