Giving notice of changes to employment contracts

Employers can impose changes to employment agreements by providing notice, but the amount of notice required is the same as dismissal without cause

Stuart Rudner
By Stuart Rudner

In my last post, I discussed constructive dismissal. In this post, I will discuss how employers can impose changes to the employment contract by providing notice, without triggering a finding of constructive dismissal.

The good news is  it can be as simple as advising the employee  that, for example, "as of April 1, 2013, your salary will be reduced to $50,000 per annum."

The bad news is the amount of notice required is the same as what would be required in the event of a dismissal without cause. Unless the existing contract says otherwise, it will be "reasonable notice." In other words, it can be months or even years. Where several employees are involved, the most prudent course of action is to determine which employee is entitled to the greatest period of notice, and then provide that amount of notice to all affected employees.

Once an employee has been notified of the future change, she is, of course, free to seek other employment, as she would be at any time. However, if she remains in the employ of the company, the company will be entitled to impose the changes once the notice period has passed. If the employee chooses to leave at that point, she should be precluded from successfully bringing a claim for constructive dismissal in the absence of unusual circumstances.

In recent years, there has been some de­bate regarding whether employers are still en­titled to make changes by providing notice, or whether the law was changed by the Ontario Court of Appeal’s 2008 decision in Wronko v. Western Inventory Service Ltd. The decision of the Divisional Court of the Ontario Superior Court of Justice in Kaf­ka v. AllState Insurance Company of Canada suggests the decision in Wronko was fact-spe­cific and did not change the law.

In Kafka, the employer advised employ­ees of changes to employment agreements by way of a form letter and a video presentation. The company provided more than two years’ notice of the changes. However, a group of employees attempted to bring a class action against the company. The Divisional Court interpreted the Court of Appeal’s decision in Wronko as being fact-specific and rejected the argument that fundamental changes to an employment agreement can be made by providing notice. In so doing, the court confirmed a fundamental change does not amount to a constructive dismissal where the employer provides the employee with reasonable notice of the change.  This is consistent with the position I have taken since Wronko was decided.

Depending upon the circumstances, providing notice of a change in the terms of employment may be the most beneficial course of action to take. However, it must be kept in mind that, like working notice, it is possible that doing so will have a negative impact on morale. You may not want to keep someone around for a year's worth of notice, and then indefinitely thereafter, if he will be visibly or vocally unhappy and potentially poison the work environment. As well, if the employee has access to sensitive information, or significant client relations, you may not want to put yourself in the position where he can exact some sort of revenge for the manner in which he perceives himself to have been treated.

Conversely, the ability to impose unilateral changes, even with the mandatory time delay, is often a far better alternative than either letting the employee go or keeping him on without changing the employment relationship. Like any other potential course of action in the context of employment, this is a decision that must be made on a case-by-case basis after considering the circumstances and the persons involved. As always, it is advisable to obtain legal advice in order to minimize your risks in proceeding.

Stuart Rudner is a partner in the Labour & Employment Law Group of Miller Thomson LLP, a national law firm. He provides clients with strategic advice regarding all aspects of the employment relationship, and represents them before courts, mediators and tribunals. He is author of You’re Fired: Just Cause for Dismissal in Canada, published by Carswell. He can be reached at (905) 415-6767 or [email protected]. You can also follow him on Twitter @CanadianHRLaw and join his Canadian Employment Law Group on LinkedIn.

Latest stories