Employers should be careful about unilaterally imposing changes to the terms of employment
by Stuart Rudner and Anique Dublin
In the recent case of McLean v. Dynacast Ltd., an employee was awarded 28 months’ notice and $25,000 in aggravated damages after the Ontario Superior Court of Justice found that he had been constructively dismissed.
Christopher McLean worked for Dynacast Ltd. for over 34 years. In 2010, he was promoted from a unionized maintenance role to the non-unionized position of sales and service technician. As a result of this promotion, McLean was required to sign a new employment contract which included a non-modification clause. The clause read as follows: “Any modification to this letter of appointment must be in writing and signed by the parties to it.”
In January 2017, McLean was advised by Dynacast that he would be assigned a new position of project technician. The new role required McLean to work on the plant floor where he would be responsible for refurbishing machinery or performing maintenance work. Dynacast also proposed a bonus structure that was dependent upon McLean completing various refurbishment tasks within an assigned time. He was no longer responsible for sales and his commission would be eliminated. McLean was advised that the position change was necessary as sales were down. At trial, this was proven not to be true; sales were in fact increasing.
McLean refused to accept the changes to his duties and remuneration and advised Dynacast that he was not interested in the new position, as he saw it as a demotion. McLean’s employment ended when he did not report to work in the new position.
McLean brought an action for constructive dismissal. He claimed that Dynacast unilaterally breached the contract by advising him that the reassignment would take place despite his objections.
The court held that McLean was constructively dismissed. Constructive dismissal may occur in situations where an employee has not been formally terminated but the employer makes a substantial change to the terms of the employee’s employment without the employee’s consent.
In deciding whether McLean was constructively dismissed, the court relied on the leading decision in Potter v. New Brunswick (Legal Aid Services Commission). In that case, the Supreme Court of Canada reviewed the doctrine of constructive dismissal and set out a two-pronged test for determining whether a constructive dismissal had occurred.
The first stage of the test involves a consideration of whether the employer’s unilateral change amounts to an essential breach of the employment contract. If so, then the second stage of the test involves a consideration of whether an employer’s behaviour demonstrates an intention not to be bound by the employment contract, resulting in a constructive dismissal.
In Potter, the Supreme Court of Canada confirmed that determining whether an employee has been constructively dismissed is a “highly fact-driven exercise” in which the court must “determine whether the changes are reasonable and whether they are within the scope of the employee’s job description or employment contract.”
The Ontario Superior Court of Justice held that Dynacast unilaterally breached the non-modification clause of the contract by advising McLean that the reassignment would go ahead despite his objections.
The court also held that a reasonable person in the same situation as McLean would have felt that the “essential terms of the contract were being substantially changed” and that their employment and future with the employer had been significantly limited.
The court concluded that the changes to McLean’s contract could not be described as a “minor tweak”, they were not reasonable and they were not within the scope of the contract. Therefore, McLean’s loss of faith was both understandable and justifiable.
Interestingly, McLean was awarded 28 months’ notice.
The court acknowledged that while there is no absolute upper limit on what a long-term employee can expect by way of notice, exceptional circumstances are required before the notice period can exceed 24 months. The court also acknowledged that the exceptional circumstances “must include more than a lengthy period of loyalty and dedication to the employer and the business venture.”
In this case, the court found that Dynacast’s conduct, collectively considered, rose to the level of exceptional circumstances. This included:
Dynacast’s unilateral breach of the contract
the radical configuration of the job description, which amounted to a demotion
the mistaken or misguided rationale for the changes
the domineering attitude taken by Dynacast in unilaterally imposing the changes.
Bad faith damages
McLean was also awarded $25,000 as aggravated and moral damages for the bad faith manner of the dismissal.
The court concluded that the conduct of Dynacast in unilaterally breaching the non-modification clause of the contract and dishonestly indicating that the change in the job description was the result of a decline in sales caused McLean to suffer mental distress. The court also concluded that McLean’s distress was made more significant by virtue of his age (58) and his expressed intentions to retire from his position with Dynacast.
Employers should be careful about unilaterally imposing changes to the terms of employment, including duties, role or compensation, and should be particularly careful about being dishonest. This case confirms the risk of constructive dismissal and the fact that the 24-month cap will be exceeded when there are exceptional circumstances.