‘Unilateral and dramatic’ change to duties and compensation found to be constructive dismissal

Kolaczynski v. Benz Sewing Machines Ltd. [2002] O.J. No. 1117

In the late 1980s, Eugene Kolaczynski was hired as a controller by Benz. After only a few years, he was promoted to the position of vice-president and general manager. The new position had a significant increase in salary, including a commission structure.

In 1995 Kolaczynski was given additional responsibilities to make one of Benz’s fledgling subsidiaries profitable again.

This involved a lot of travel between Ontario and Quebec. In 1996 it came to Benz’s attention that workers in the subsidiary were displeased with Kolaczynski’s management style and that sales were down more than 40 per cent. Benz told Kolaczynski that he would no longer be involved with the management of the Quebec subsidiary.

In 1997 Kolaczynski was given the task of installing and managing a new computer system that would help manage the accounts for Benz. At the end of 1997, it became apparent to Benz that the accounts were in a “horrible” state. On Jan. 5, 1998, Benz’s president met with Kolaczynski, and told him he was being demoted back to his original position, but would still be responsible for the computer system.

Accordingly the president indicated that Kolaczynski’s salary would be cut because of his demotion. After the January 1998 meeting, Kolaczynski began taking medication to counter depression, symptoms of which had emerged during his time managing the Quebec subsidiary.

In March 1998, Kolaczynski wrote a memo to Benz’s president detailing his medical conditions to management for the first time. The memo also asked management to reconsider their choice to demote him. The memo went undiscussed.

In June 1998 it had become apparent to Benz’s management that, although the computer network was installed, it was crashing frequently. Consequently Kolaczynski was only given half of his bonus, with the understanding the other half would be awarded once the computer network was running properly.

Kolaczynski asked his doctor for a medical leave due to depression. The medical leave was extended and disability payments began. Soon after the medical leave was extended, Kolaczynski took the position he had been constructively dismissed.

The judge found Kolaczynski had been constructively dismissed at the meeting on Jan. 5, 1998, because his demotion was a “unilateral and dramatic change” to his job description and remuneration. Benz argued that Kolaczynski’s acquiescence meant he accepted the new terms and conditions of his employment.

The judge disagreed, noting that Kolaczynski was clearly upset about his demotion. Kolaczynski’s subsequent actions, including the March 1998 memo, showed his unhappiness with the situation.

The judge held there was no cause for dismissal as the computer network problems warranted at most a warning and a co-operative effort to solve the problem rather than a demotion.

Because Kolaczynski was 59 and had worked for Benz for more than nine years, damages were calculated at 15-months salary inclusive of any claim for mental distress related to the demotion. The judge deducted the six-months’ salary Kolaczynski received in 1998 plus other earnings made during the notice period.

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