Uniform changes to commission structure in bad times not constructive dismissal

Re. Scaffold Construction Corp. [2001] A.J. No. 1091

Meerman was a branch manager for Scaffold. In December 1999 Scaffold ran into financial trouble and applied for a restructuring of its credit arrangements. During the restructuring period, Scaffold was planning to change its commission structure. On August 11, 2000, Meerman and others had a heated discussion with management about the proposed commission changes. Scaffold said that during this meeting Meerman said, “don’t expect too much production out of us.”

Management acknowledged that he qualified his statement by saying he would not give more than 100 per cent to the company.

On Aug. 14, 2000, Meerman was told by Scaffold he would be reassigned to a new position of “liaison” with a salary reduced by about one third. Meerman wrote Scaffold asking for more information about the new position but was explicit he was not accepting it. One week later he was dismissed without notice.

Meerman claimed he had been constructively dismissed by both the changes to his commissions discussed on August 11 and by his reassignment on August 14. Scaffold denied the changes to the commission structure or the change in duties amounted to constructive dismissal. Scaffold took the position that Meerman’s threat to decrease productivity provided it with adequate grounds to terminate his employment.

The court held the changes to the bonus structure did not constitute a constructive dismissal since the alterations to the bonus structure:

•were applied to all branch managers;

•were required as a result of the economic hardship of the employer; and

•resulted in a relatively small decline in Meerman’s total remuneration.

In examining the demotion on Aug. 14, the court did find a constructive dismissal. The terms of the new employment contract were fundamentally different from the old contract.

The court also found Scaffold did not have just cause to dismiss Meerman as his comments at the Aug. 11 meeting only showed he was willing to do no more than what his job required. Because Meerman was able to mitigate his damages by finding a comparable position within three months, his damages were capped at three months’ salary. The court awarded him commissions and a bonus that would have been earned during the notice period.

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