In most cases, an employee cannot dictate the location of their work – but agreements matter
The simple definition of a constructive dismissal is “a unilateral and substantial change to a fundamental term of the employment contract or relationship.”
Since the fundamental basis of the employment relationship is that the employee will work and be paid, it is hard to argue that telling an employee that neither of those things will happen is not a substantial change.
But what about less drastic changes? Many employers have tried to weather the COVID-19 storm by implementing reductions in hours or wages. Do those constitute constructive dismissal too? How much of a change must there be to qualify as “substantial”?
One issue that is being discussed frequently as organizations try to get back to business is whether an employee can insist on working from home. The simple answer is that, in most cases, an employee cannot dictate the location of their work. That is no different now than it was in pre-COVID days.
Even though they may have been working from home for the past few months, that was only due to the unforeseeable circumstances that we all experienced. However, what if they can show that the ability to work from home was a term of their employment agreement?
Win for employee
In the 2018 decision Hagholm v. Coreio Inc., there was a sale of the business and the new owner attempted to force Rosemary Hagholm to work exclusively from their offices. The evidence showed that previously, she had been allowed to work from home three days each week in order to avoid the commute from Waterloo to Toronto.
Hagholm took the position that she had been constructively dismissed when she was told that she could no longer work from home three days a week. On a motion for summary judgment, she was successful. The employer appealed, but Hagholm prevailed once again. The Ontario Court of Appeal agreed with the motions court judge that being able to work from home three days per week was an essential term of the employment agreement and that the unilateral change constituted constructive dismissal.
The employer also asserted that even if there was a constructive dismissal, Hagholm had a duty to mitigate her damages by continuing to work while searching for new employment. However, the Court of Appeal sided with the employee on this point as well, holding that:
“It would not be objectively reasonable to require a 60-year old employee who, more than 20 years earlier, had stipulated she would not accept a position if it required her to commute from Waterloo to Toronto every day, to mitigate her damages for the appellant's breach of contract by doing so.”
This pre-COVID case is instructive, as it squarely addresses the issue of relocating an employee’s place of work. While every case must be assessed on its own merits, if working from home (or any particular place) is part of an employee’s contract, an employer may not have the right to unilaterally change that.
Win for employer
Another constructive dismissal that should be more welcome to employers is the 2019 decision Clarke v. Halifax Herald Ltd., as it confirms that not all unilateral changes constitute constructive dismissal. Calvin Clarke was a long-serving account executive selling print ads in newspapers. After a brief sick leave, he was advised that he would be moved to a business development role. While the new role would be out of the same office and reporting to the same person, Clarke would be selling print orders for Bounty Print and promotional products with Headline Promotions. The evidence was that the employee tried the new role but gave up and resigned after seven weeks.
While the trial judge found that there was a constructive dismissal, the Court of Appeal found that she had failed to properly assess the magnitude of the changes to see if they rose to the level of “substantial”. As the court confirmed:
“The first branch of the test for constructive dismissal, the one that requires a review of specific terms of the contract, has two steps: first, the employer’s unilateral change must be found to constitute a breach of the employment contract and, second, if it does constitute such a breach, it must be found to substantially alter an essential term of the contract.”
The Court of Appeal found that the evidence did not disclose a sufficient change to justify a finding of constructive dismissal, and that the trial judge had erroneously relied on the subjective view of Clarke
It is important to remember that a change will not be a constructive dismissal if the employee agrees to it. Such agreement can be based on the employment agreement itself, or an agreement at the time of the change.
For example, when our clients had to consider temporary layoffs due to the pandemic, we divided them into two groups. The first had contracts which explicitly gave them the right to impose temporary layoffs; in that case, they could simply proceed to do so.
The second group did not have temporary layoff clauses in their contracts. In those cases, we worked with them to obtain the consent of the employees to the layoff, thereby precluding a constructive dismissal claim.
For any contemplated changes, employers should consider
- whether the contract of employment gives them the right to implement it
- whether the change is to a fundamental term of the relationship
- whether the change is substantial
- based on the above, whether there is a need to obtain the agreement of the employee.
If an employee objects to a change, then the employer has various options available to it, which can be discussed in a future post.