Good employer, bad decision

Constructive dismissal can occur even when nobody is acting maliciously

Background

Even when nobody is acting in a malicious manner, legal problems can arise in the workplace. A recent case heard by the British Columbia Supreme Court provides a perfect example. In that case the failure to communicate between a sensitive employee, an office manager seeking to plan ahead and a kindly company president ended up in litigation. The court awarded the employee 10-months’ notice after it ruled she had been constructively dismissed in a case that proves even the best-intentioned employer can inadvertently put its foot in its mouth.

The case: Fisher v. Lakeland Mills Ltd.

Kathleen Fisher began working for Lakeland Mills Ltd. on Aug. 12, 1985, at the age of 48 as a switchboard operator and receptionist. In 1996, with a change in CEOs and less secretarial work, she took on the accounts receivable and accounts payable. Her wages steadily increased and with the other office staff she regularly received an annual bonus, which fluctuated with the company’s fortunes. She also did the office janitorial work which earned her an additional $1,000 a month in 2003.

Lakeland manufactures lumber primarily for American export. The court described it as “a good place to work.” By 2003, the front-office paperwork involved — apart from reception and switchboard work — payroll, shipping, purchasing, receiving, accounts payable, accounts receivable, contract logging and related tasks.

Fisher did the reception and switchboard work and accounts payable and receivable. Another staff member was responsible for shipping, while another did the payroll. Backup for holidays and emergencies was provided by a student. The office manager and accountant was Annie Horning, who also did the contract logging and other tasks.

Retirement talk not entertaining

In April 2002 Fisher turned 65. Lakeland has no retirement age and it is not uncommon for its staff to work past age 60. While the office staff only discussed retirement in generalities, regular visitors to the office, particularly truckers and sales staff, would often speak to Fisher about her retirement.

“The inquiries eventually lost their entertainment value and (Fisher) began to complain to the other ladies in the office about the inquires,” the court said. “Occasionally, it would get her down and they would console her, saying that any such decision was hers.”

In April 2003 it got her so down that she decided to go talk with Keith Andersen, the company’s president. Andersen, who the court described as a “kindly and affable gentleman,” assured her there was no concern and that she could stay with the company as long as she wished.

In July that year, the office backup role ended when the student resigned. Horning prepared a memo outlining the concerns she had for the office staff with the lack of a backup person. Because there was a lack of holiday and emergency coverage without the student, she said Fisher would need to cover shipping.

But Horning was concerned about Fisher’s ability to do so because of a new system that had been put in place to deal with the additional softwood lumber duties that had been imposed by the United States. A few days later the decision was made to try to make do with the existing staff for the time being and that if it became unmanageable, they would look at hiring an extra part-time worker.

On Aug. 12, 2003, the shipping employee began to train Fisher on the software so she could cover her in emergencies and for vacations. Horning also attended the training. Even though the new software was easier to use, Fisher was not able to learn it.

The shipping employee told Horning that Fisher wasn’t learning the system, and wouldn’t be able to provide backup. Horning had a brief discussion with the company president, indicating that if Fisher couldn’t provide the backup on shipping, then they would need to look at other alternatives. Horning then met with Fisher and asked her how the training was going. To her surprise, Fisher said it was going fine. Horning said the training would continue, and then continued the discussion by asking her when she might retire.

“She suggested to Ms. Fisher that if it was going to be relatively soon, then the company could muddle along,” the court said. “But if it was going to be more distant, then the company needed to hire a backup employee who would need to pick up some of Ms. Fisher’s duties, perhaps the accounts payable as the new employee could not sit idle.”

During this discussion it was pro- posed that Fisher come into work in the morning of Aug. 27, before 9 a.m., so she could do the shipping by herself. That would give the company a chance to see how she was doing with the training. Horning said she brought up these options to give Fisher the chance to say she did not want to cover shipping and that it was not going well.

But Fisher wanted to continue the training and said she was not having a problem. She said she planned to retire in about one year to five years. At no time did Horning tell Fisher she could go back to her own job, and Fisher felt her options were to either learn shipping or risk losing parts of her job, such as accounts payable, to a new staff member.

On the evening of Aug. 26, Fisher again met with the company president. She told Andersen that she was upset and she did not know what else to do, that it was not what she wanted but that it looked like she would have to retire because she could not do shipping relief.

Andersen, who was 60, said that whatever she decided to do, he would pay her until the end of the year. He spoke to Fisher about a former senior partner who had waited until he was 82 to retire and found out he could not enjoy his retirement because of his ill health and it was sensible to retire while still healthy. When asked why he did not directly give her the option of continuing in her old job, Andersen said he never gave it any thought because he thought she had already made up her mind.

“His view was that when someone reaches the point of offering a retirement or wanting to retire at his age, he does not tend to talk people out of it because retirement is something to look forward to,” the court said.

Fisher came in early the next morning to do the shipping work, and ran into some problems. Shortly after she met with Horning and told her she was retiring, and that she had talked to Andersen the night before. Andersen went away on vacation shortly after, but when he returned to work on Sept. 22 there was a letter waiting for him outlining Fisher’s claim for constructive dismissal. He attempted to meet with Fisher that day, but her solicitor had told her not to and so no meeting took place. The court found Fisher had been constructively dismissed.

While it began in an innocent fashion, with an informal office discussion, there is no question that the proposal to add relief shipping duties to Fisher constituted a substantial change in her duties, the court said. The new duties involved computer programming, which Fisher was not comfortable with. Horning had expressed doubts about her ability to do the job, and a week of training reinforced that assessment.

Fisher felt she had no choice in the situation, that she had to either learn the new task or continue to work only if she gave up some of her existing duties and provide a retirement date.

No deliberate plan

The court said there was no deliberate plan by Lakeland to force Fisher to resign as a result of the changes in her duties. But Andersen, who the court and Fisher spoke glowingly about, did not see the legal problem that faced him.

“Rather, he simply tried to console his long-term employee and suggested her retirement decision was a good one,” the court said. “I do not fault Mr. Andersen one iota, but in terms of contract law that applies, Ms. Fisher had been faced with unilateral changes of a substantial kind to her employment. She stated that she felt she had been forced to retire and did not want to. Mr. Andersen did not perceive the possible solution, namely to assure her she could continue in her old position.”

Having found she had been constructively dismissed, the court then turned to the amount of notice she was entitled to. At the time of dismissal, Fisher was 66 and did not have management responsibilities. But she was the face that greeted visitors to the company, and “that is always an important position,” the court said. It determined 10 months’ notice to be reasonable, and added on a $2,000 bonus for 2003 and 10 months of insurance premiums at $122.91 per month.

For more information see:

Fisher v. Lakeland Mills Ltd., 2005 CarswellBC 101 (B.C. S.C.)

The law of constructive dismissal

In Farber v. Royal Trust Co., the Supreme Court of Canada said:

“It has been established in a number of Canadian common law decisions that where an employer unilaterally makes a fundamental or substantial change to an employee’s contract of employment — a change that violates the contract’s terms — the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed. The employee can then claim damages from the employer in lieu of reasonable notice.”

In that case, a regional manager found his position eliminated as part of a corporate restructuring and was offered a branch manager’s position and some financial compensation. However, the regional manager’s position had a guaranteed salary but the branch manager’s salary was based solely on commissions. The court found constructive dismissal in these circumstances.

For more information see:

Farber v. Royal Trust Co., 1996 CarswellQue 1158, 27 C.C.E.L. (2d) 163 (S.C.C.)

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