Two cases highlights risks of constructive dismissal
Exclusive to Canadian HR Reporter from Rudner Law.
Some employers assume that changing an employee’s work location is a routine operational decision. But when that change significantly impacts the employee, it can create serious legal risk.
In two decisions involving the same employer, Rainbow Concrete Industries Ltd. v. Grace and Rainbow Concrete Industries Ltd. v. Gallagher, the Ontario Labour Relations Board confirmed that a forced relocation can amount to constructive dismissal where it fundamentally changes the employment relationship.
These cases are a reminder that relocating an employee is not always a risk-free decision. In some circumstances, it may be treated as a constructive dismissal and result in liability to the employer.
Constructive dismissal: legal framework
Constructive dismissal occurs when an employer unilaterally makes a substantial change to a fundamental term of employment.
While this is often associated with changes to compensation or job duties, a change in work location, whether affecting the entire workplace or a single employee, can also qualify. The key question is whether the change is substantial enough to amount to a constructive dismissal.
Not every relocation will meet this threshold. The analysis is fact-specific and depends on the full context of the employment relationship.
Grace and Gallagher cases
Both cases involved long-term employees who had worked for years at the employer’s North Bay location. In each case, the employer decided to consolidate operations in Sudbury, about 125km away.
The employees were told to report to the Sudbury location. They were also told that if they did not do so, the employer would treat this as a resignation.
The employees filed claims with the Ministry of Labour, Immigration, Training and Skills Development of Ontario, alleging that they had been constructively dismissed as a result of the forced relocation, and that they were owed statutory termination and severance pay under the Employment Standards Act, 2000 (ESA).
The employment standards officers assigned to the complaints agreed with the employees and ordered the employer to make payment.
The employer brought applications for review to the Ontario Labour Relations Board seeking review of the employment standards officers’ decisions.
Significant change in commuting time
A key factor in both cases was the impact on the employees’ commute. The relocation would have resulted in a daily round trip of about three hours. This was not a minor inconvenience; it was a substantial change to their working conditions.
A significant increase in commute time can make continued employment unreasonable. Even if the role itself remains the same, the change in location can still amount to a fundamental change.
In Grace, the situation was particularly difficult. The employee did not have a driver’s licence or a vehicle, which the employer knew. This made the new work arrangement extremely difficult to manage in practice.
In Gallagher, the employee did have a vehicle, but the change would have added substantial costs and time. He estimated significant increases in fuel and other expenses, along with hours of additional travel each day. He had only travelled to other locations occasionally in the past, and had been compensated when he did so.
Constructive dismissal in both cases
In both Grace and Gallagher, the board concluded that the relocation was a fundamental and adverse change to the employment relationship.
As a result, it agreed that both employees were constructively dismissed.
These decisions confirm that a significant relocation can cross the line, particularly where it creates a major increase in commute time or cost.
Different results on compensation
Although both employees were constructively dismissed, the outcomes were very different.
In Gallagher, the employee had long service and met the requirements for termination and severance pay. As a result, he was entitled to compensation, with the final amount to be determined.
In Grace, the employee received no compensation despite the finding of constructive dismissal. This was due to a technical issue under the ESA. The employee had previously been on a lengthy layoff that exceeded the statutory limit. That layoff was deemed to be a termination, which reset his service for the purpose of calculating entitlements.
When he was later constructively dismissed, his service was too short to generate meaningful entitlements, and the employer had already met its minimum notice obligations.
These results would likely have been very different had the employees pursued civil lawsuits rather than ESA claims with the ministry. Unlike ministry proceedings, civil lawsuits allow for recovery of common law reasonable notice, which in most cases exceeds statutory termination and severance entitlements under the ESA. Statutory awards are fixed and formula driven, based solely on the employee’s length of service.
By contrast, common law notice is assessed at the court’s discretion and takes into account the full circumstances of the employment relationship. As a result, both employees would likely have been entitled to significantly greater compensation had they advanced their claims through the civil courts instead.
Risks of relocation
Forced relocation sits in a grey area of employment law. In some cases, it will be permissible. In others, it will amount to constructive dismissal.
The difference depends on the specific facts. It is therefore important to seek legal advice before implementing a relocation decision in order to properly assess potential liability and risk exposure.
Alex Minkin is an associate lawyer at Rudner Law in Toronto. He can be reached at (416) 864-8500 or [email protected].
