Probation wording costs employer

Long-time employee wins constructive dismissal case after being placed on probation; court says employer’s intent wasn’t clear

Placing an employee on probation does not constitute constructive dismissal — it’s a legitimate method of notifying an employee of performance concerns. But a recent Nova Scotia Supreme Court ruling shows the conditions an employer attaches to the probation can lead to a finding of constructive dismissal.

Neil Chambers, 45, started working for Atlantic Netcom Ltd. in 1987 and continued with its successor company, Axia Netmedia Corp. (conducting business as “Netricom”) after it had acquired the shares of Atlantic in May 1999.

Chambers held various positions with the two companies, his last as manager of customer service/project manager. Netricom is a high-tech firm, with its primary business being the designing, installation and management of communication networks including the provision of computer and communication cabling, hardware and related services.

Chambers owned a minority share interest in Atlantic and received the final payment for his shares, by way of shares in Netricom, in May 2001. He continued in employment with Netricom until June 2001.

In June 1999 he was placed on three-months’ probation for poor sales performance. In September 1999, John Gillis became director of operations. Chambers reported directly to Gillis. He wrote to Chambers and told him his sales performance was lacking. He asked Chambers to provide a three-month action plan that would establish monthly targets. He never completed the plan.

On Feb. 28, 2001, Gillis wrote to Chambers detailing a number of concerns and changes in his role, and told him that if there was “not a significant improvement in achieving the budget targets, I will have no choice but to consider placing you on probation or dismissal.”

On May 7, Chambers received a letter from Gillis stating that, effective immediately, his compensation was being changed to 100 per cent commission. Chambers had previously been paid a base salary and a car allowance.

On May 15 Chambers sent an e-mail to Gillis stating that although he was prepared to try the change for a few months, “that should not be understood to mean that I accept or agree with what has been imposed. In fact, I advise that I do not accept, agree or condone these significant changes in the terms of my employment.”

Three days later the company rescinded the commission scheme and Gillis continued to be paid as he had been in the past. But on June 12, Netricom wrote to Chambers and told him that instead of changing him to 100 per cent commission immediately, it would continue his probation for 12 months. The company said it considered him on probation since May 7 and that at the end of the 12-month probation period, if he continued in employment, he would be put on a 100 per cent commission-based salary.

It again specified that failing to meet his performance objectives could result in his dismissal at any time during the probation — that turned out to be the Achilles heel in the employer’s approach.

In response to that letter, Chambers sought legal advice and told Netricom on June 28, 2001, that he considered himself to be constructively dismissed. The Supreme Court upheld that notion.

The fact that the employer stated Chambers could be dismissed at any point during probation supported the notion he had been constructively dismissed, the court ruled.

“He had … every right to conclude he had been constructively dismissed,” wrote Justice MacAdam in the decision. “To have returned to work, in the circumstances of the defendant’s notice, would have effected a fundamental change in the terms of his employment contract. He would then, although technically on probation, be subject to termination at any time his sales did not meet performance objectives. That would be a fundamental different term of employment than working in circumstances where the employer could only terminate on just cause or reasonable notice.”

Netricom argued it was merely trying to ensure that Chambers, upon being placed on probation, did not have the mistaken assumption that he was guaranteed to stay on with Netricom for the full probation period. In essence, it wanted to ensure Chambers knew that his employment could still be terminated for cause during the probation period.

But the court said if that’s what it meant to say, then Netricom should have said that in the probationary letter.

“(Netricom) drafted that letter,” wrote Justice MacAdam. “If it intended to convey some meaning other than the meaning attached by (Chambers), and in our view, reasonably attached by (Chambers), then the fault, and the consequences, are with the defendant rather than the plaintiff.”

The court awarded 11 months’ notice, but deducted three months because it found he didn’t properly mitigate his damages (for reasons for the deduction, see side bar on page 3245.)

For more information see:

Chambers v. Axia Netmedia Corp., 2004 CarswellNS 33, 2004 NSSC 24, 220 N.S.R. (2d) 338, 694 A.P.R. 338, 30 C.C.E.L. (3d) 243 (N.S. S.C.)

Internet job search doesn’t cut it

The court knocked the notice period down from 11 months to eight months, partially because it said the plaintiff was too reliant on the Internet as a means of searching for jobs and therefore didn’t fully mitigate his damages. Here’s why the court reduced the notice period:

Lack of effort. Chambers said he avoided looking for work in the same industry in which he had been employed with Netricom.

“It appears there was no reason for this choice, other than a desire to try something new,” said Justice MacAdam.

Relying on the Internet. Interestingly, the court was critical of relying too heavily on the Internet for job searching as a way to mitigate damages.

“Although the emerging use of the Internet as a vehicle in searching for employment opportunities and contacting potential employers has become more common, I am not satisfied it is the only avenue to be pursued,” said Justice MacAdam.

He said the efforts of Chambers were to a large extent confined to reading the local newspaper and forwarding his resume to employers.

“Although commendable, I am satisfied, by restricting his search to this one vehicle, the effort was too limited,” said Justice MacAdam. “Although there is no evidence as to whether these other efforts would necessarily have produced a positive result, earlier than he was able to find the employment he did, I am satisfied there was, to some extent at least, a failure to take all reasonable steps to mitigate.”

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