'They didn't put anything in writing,' says lawyer citing risks of off-the-cuff decisions by employers
When does remote work or working from home become a fundamental term of employment?
It’s a question that came to the forefront during the pandemic, and it continues to challenge many employers today with return-to-office mandates.
A recent decision provides some answers after an Ontario court ruled in favour of a former employee who claimed she was constructively dismissed after her employer significantly altered her remote work arrangement.
The employer’s decision to reduce the employee’s hours and responsibilities constituted a unilateral and fundamental change to the employment contract, meeting the legal threshold for constructive dismissal, found the court.
"It wasn’t done in a way that is governed by any rules or policies, and it was sort of off the cuff, allowing the employee to leave. That’s the starting point at least, of that situation, and I think that is what ultimately led to it to be a bad decision for the employer,” says Christopher Achkar, managing partner at Achkar Law in Toronto.
Damages for constructive dismissal
Lesley Byrd had worked for the employer, Welcome Home Children’s Residence, since 2018 and transitioned to remote work in 2020 when her husband, a Canadian Forces member, was posted to Europe. The court found that the remote work arrangement was informally agreed upon and had become an accepted term of her employment.
However, in early 2022, the employer hired a new on-site manager and Byrd was informed that her hours would be cut to 15 per week, with most of her responsibilities reassigned.
Frustrated by the change, Byrd ceased working and lawyers for both sides exchanged communications. The children’s residence offered Byrd two options: to reattend physically at the workplace or resign.
She ultimately resigned in April 2022 and sought damages of $25,287, alleging constructive dismissal.
In Byrd v Welcome Home Children’s Residence Inc, the Ontario Superior Court of Justice, Small Claims Court, ruled that Byrd was right:
“The evidence taken as a whole supports the finding that the defendant made unilateral and fundamental changes to terms of Lesley’s employment contract. A reasonable person would conclude that all of the above constitutes constructive dismissal.”
Byrd was awarded $18,860, reflecting a notice period of 6.5 months, with some deductions for mitigation based on her income from the school job.
Lack of formality with remote arrangement
A key issue in the case was the lack of formality with the remote setup. The court noted that the arrangement was reached informally, with no written agreement or policy outlining its permanence or potential changes.
The case highlights how an employer's failure to formalize a remote work agreement can lead to unintended consequences, says Achkar.
"It seemed that the remote work position was reached almost haphazardly when the employee asked to relocate, and the employer simply agreed. They didn't put anything in writing. They didn't really look into what makes that remote role a full-time role versus a temporary role.”
Fundamental terms of employment
One of the key legal questions in this case was whether the work from home, in Europe, had become a fundamental term of Byrd’s employment.
In the absence of a written agreement, an employer looking to bring an employee back to the workplace should assess whether the remote work arrangement has become, as the court put it, an “accepted part” of the job, says Mark Van Ginkel, senior associate at Filion Wakely in Toronto.
“That's a difficult exercise, and it's going to be quite fact-specific,” he says. “I wouldn't say there's a bright-line test that employers can apply to know when.... remote work has become a part of their employment agreement.”
There are several factors a court might consider, says Van Ginkel, such as the length of the remote work arrangement, what was communicated prior to and during the arrangement, and whether the employee rearranged their life around remote work.
“So, assuming that the remote work arrangement is an accepted part of the employee’s contract, and assuming there's no written agreement that gives the employer the right to change that, there is a real risk of constructive dismissal if you demand that the employee return to the office.”
Achkar says that it is not necessarily about the length of time an employee works remotely but rather the circumstances under which this setup was introduced.
"An employee can start a position remotely and work for a week for it to be a fundamental term. In fact, even if it’s in a contract and the employee didn’t even start yet, then it would be considered a fundamental term,” he says.
“Any term that makes it more attractive for the employee to agree to it and act on it makes that term a fundamental one. So, it isn’t really the time itself, it’s more what led to it just to begin from the get-go… [and] the understanding of both parties.”
Achkar clarified the concept of condonation.
“Normally, if an employee does something contrary to a policy, but the employer agrees to it without actually making a big deal out of it, then it would be seen that the employer has condoned that change."
Importance of written contract
In the Byrd case, the court examined the impact of the absence of a written employment contract in the case. While the employer argued that it had given notice of upcoming changes in October 2021, the court found that this was insufficient, as no concrete details were provided at the time.
A well-drafted employment agreement gives employers the flexibility to allow remote work without it becoming a fundamental component of the employment relationship, says Van Ginkel.
And to accomplish that objective, the agreement needs to state, one, that any remote work opportunities are granted at the employer's discretion, and, two, that the opportunity to work remotely may be rescinded at any time and without notice, he says.
Achkar stressed the importance of such a document in preventing disputes, but it is not the only consideration.
"An employment contract obviously outlines everything we need to know about the employment relationship, but it’s not the only document or set of facts that we need to look at. Advance notice is also important. So, something could be not in an employment contract, but if the employer has given enough notice of that contract or a term in that contract changing in time, then that would be equally valid.”
Advance notice needed for remote work recall
The Ontario court decided that there was no credible evidence that the employer communicated a specific right to recall the employee until March 2022 (about 20 months after the employee’s move):
“A fundamental term such as a right to recall an employee from Europe to work in-person in Ottawa calls out for clear and timely notice to the employee. Here, there was none.”
One way for employers to legally alter remote work arrangements is by providing adequate notice, says Achkar.
"Had the employer informed the employee ‘In six months’ period, we’re going to need you to come back and work in the office,’ in a way that is, yes, breaching the original terms of the agreement,” he says.
“So, that is a change, but if the employee has had enough notice of it, it would be harder for them to say that they will refuse it, and it’s a constructive dismissal situation."
With the consent of an employee, an employer can change something faster, but if the employee does not agree, then they are owed notice of that change, says Achkar, “whether it's payment in lieu of notice or time as a way of notice that the terms will be changing.”
Employers can only require that employees return to the workplace in those circumstances if they make a change to their contract, says Van Ginkel.
“Typically, there's two ways to do this: the first would be offering a signing bonus or some other benefit in exchange for the new contract; [the second would be] you can provide the employee with sufficient notice that the terms of their employment will be changing,” he says.
“How much the bonus should be and how much notice is required will vary depending on the circumstances including things like the employee’s age, their length of service, the position they hold, and more.”
Best practice: Remote work policies
Not surprisingly, more employers have implemented explicit policies around remote work, says Achkar.
"Ever since the pandemic, many terms became a bit more of a staple in agreements. Working from home is one. And the other one is layoff provisions, allowing employers to lay people off during economic hardships.”
Even if remote work and work from home policies weren’t included in the contract itself, they could be added as a policy later on, he says, “as long as the employees have been given sufficient notice of this fact changing in their role.”
Certainly, every new employment contract should include such a policy, and if not, employers should have a separate, standalone remote work agreement, says Van Ginkel.
“Then, the intentions and expectations of both parties can be made clear,” he says. “Best-case scenario is you have good language in the employment agreement, and then you have a followup remote work agreement that's targeted to the specific remote work that's being done.”
The timing is key because with employment contracts, most employers don't regularly update them for existing employees, says Van Ginkel.
“That's not surprising, but now it's becoming more of an issue because for longer-term employees who don't necessarily have new employment contracts, or who began a remote work arrangement on the basis of trust and goodwill, now that things are changing, they don't necessarily want to change.”
