Promotion without change in pay

Question: Can an employee be promoted to a position with different job duties and more responsibilities without a change in compensation?

Answer: At the heart of most employment relationships is the employment contract, which governs the fundamental terms of employment. These fundamental terms include compensation, hours of work, and, importantly, job duties and responsibilities. An employer must carefully decide whether and how to change the fundamental terms of employment, as doing so may result in an employee’s claim of constructive dismissal.

A constructive dismissal occurs when an employer’s unilateral change of a fundamental term of an employment contract in effect amounts to a repudiation of the contract. This principle applies even in the case where the changes are considered a promotion. An employee who successfully establishes a constructive dismissal claim is entitled to damages in lieu of reasonable notice of termination. An employer can avoid this by obtaining the employee’s consent or providing the employee with reasonable notice prior to implementing the change.

Obtaining the employee’s consent

An employee may choose to accept a change in job duties and increased responsibilities without a change in compensation. This may be common for an employee who would like the status or other benefits that are related to the promotion, or an employee who is interested in gaining more experience. In this case, an employee’s claim of constructive dismissal will likely be abandoned, as the change of employment would no longer be considered a unilateral act and therefore not constitute a breach of contract.

It is important to note, however, that even if the employee accepts the promotion, the terms may not be binding on the employee due to a lack of new or additional consideration. The most common form of consideration is increased remuneration by way of salary or bonus as courts have been hesitant to find certain other types of compensation to qualify as adequate consideration.

For example, an increase in pension contribution, increased vacation entitlement, or tax benefits that flow from the governing statute, have all been found to be insufficient to constitute adequate consideration for varying an employment contract. Therefore, while an employee may have abandoned her claim of constructive dismissal in this case, without consideration the employer will likely not be able to rely on new elements of the employment contract.

If an employer does not obtain the employee’s consent, then the employee has two options. The first option is rejecting the change outright and then claiming constructive dismissal. The second option is making it clear to the employer that she is rejecting the new terms. The employer may then respond by either terminating the employee and offering re-employment with the new promotion, or by not responding. If the employer does not respond, it is regarded as acquiescing to the employee’s position.

Providing reasonable notice prior to implementing the change

An employer may also choose to provide the employee with reasonable notice prior to changing the employee’s job duties and increasing her responsibilities. Generally, the longer an employee has worked for the same employer, the more notice of this fundamental change the employee is entitled to receive. Once the employee’s applicable reasonable notice period has expired, the employer can enforce the employment changes, and the employee will likely have abandoned her claim that she has been constructively dismissed.

For more information see:

•Potter v. New Brunswick (Legal Aid Services Commission), 2015 CarswellNB 87 (S.C.C.).

•Gaudio v. Banca Commerciale Italiana of Canada, 1999 CarswellOnt 4176 (Ont. S.C.J.).

•Agrios v. Mediavision Inc. 1982 CarswellAlta 51 (Alta. Q.B.).

•Wronko v. Western Inventory Service Ltd, 2008 CarswellOnt 2350 (Ont. C.A.).