Changes to remote work arrangement, bonus add up to constructive dismissal

Verbal agreement with previous company still valid 22 years later: Court
By Jeffrey Smith
|Canadian HR Reporter|Last Updated: 06/25/2018

An Ontario company constructively dismissed a long-time employee when it unilaterally changed her 22-year work-from-home arrangement and dramatically reduced her last quarterly bonus, the Ontario Superior Court of Justice has ruled.

Rosemary Hagholm, 60, began working at MicroAge, an IT services company based in Toronto, in 1982. After 10 years, she quit because she had moved to Waterloo, Ont., more than 100 kilometres away.

Two years later, a vice-president at MicroAge asked Hagholm if she would come back on a six-month contract. Hagholm agreed to the temporary position. However, at the end of the contract, she was offered a full-time position.

She accepted the offer on the condition that she could work from home three days a week and commute to the office twice a week.

Hagholm worked for MicroAge under this arrangement for two decades. In 2000, she became a manager for consulting services and was responsible for staffing and budgeting. Her compensation included an annual bonus.

In 2015, MicroAge was sold to Coreio, another IT company. In 2017, Coreio changed her position to resource manager in advisory services as part of business restructuring.

According to Hagholm, her workload increased because she was no longer allowed to use external recruitment agencies to fill job vacancies, requiring her to do recruiting, screening and onboarding job candidates herself.

Coreio also gave Hagholm a performance improvement plan that included complaints about her performance, such as poor punctuation and grammar. The company also had concerns about declining performance since the summer of 2016, including a failure to interview potential candidates for a client and not submitting an ad to a client for approval before posting it.

Hagholm was expected to attend weekly meetings with her supervisor to discuss her progress and submit reports every week.

She was also told that her bonus for the fourth quarter of 2016 would be $6,739, a significant decrease from her usual amount, which was always close to or at the maximum entitlement of $18,000.

MicroAge had told her bonuses were tied to company revenue, but Coreio management informed her they were partly discretionary, though they couldn’t tell her how it was calculated.

Finally, Coreio told Hagholm she was expected to work full-time at the office. No compensation was offered to offset her increased commuting costs as it said the work-from-home arrangement wasn’t a term or condition of her employment and there was no written employment contract that entitled her to such an arrangement on a permanent basis.

On March 1, 2017, Hagholm resigned her position because of the new work schedule, new reporting requirements, and bonus reduction.

She also filed a claim for constructive dismissal, though Coreio argued she had never indicated concerns about her performance improvement plan or working in the office five days a week.

Agreement breached: Court

The court found that when Hagholm was rehired to permanent employment status in 1995, she negotiated an agreement in which working from home three days a week was a condition for accepting the job offer. Though there was no written contract, the verbal agreement she had with MicroAge’s vice-president was real.

As a result, working from home 60 per cent of the time was an essential term of Hagholm’s employment agreement. When Coreio changed this term, it unilaterally breached the agreement and constructively dismissed Hagholm, said the court.

Requiring Hagholm to commute 220 kms round-trip for an additional three days a week would add significant costs in time, vehicle maintenance, fuel, and risk on the busy highways, said the court.

In addition, Hagholm’s bonus was arbitrarily set by Coreio to a significantly lower level — 37.44 per cent of the maximum amount, after she received 90 to 100 per cent every year previously.

This was a contravention of Hagholm’s employment contract, since there was nothing indicating the bonus was tied
to performance.

Since Coreio constructively dismissed Hagholm by changing key elements of her employment contract — the work-from-home arrangement and the amount received for her quarterly bonus — Hagholm was entitled to damages in lieu of termination notice, determined the court.

Hagholm argued all 35 years of her service with MicroAge and Coreio should be factored in, but the court found no justification for including the 10 years before she quit in 1992.

As a result, Hagholm had 22 years of service, entitling her to 22 months of service, less the one-and-one-half months’ severance she had already received.

The court also determined Hagholm was entitled to the maximum 2016 fourth-quarter bonus, consistent with previous bonuses, ordering Coreio to pay her $11,261 to bring her total bonus to the usual $18,000.

For more information, see:

Hagholm v. Coreio Inc., 2017 CarswellOnt 21149 (Ont. S.C.J.).

Jeffrey Smith is the editor of Canadian Employment Law Today. For more information, visit www.employmentlawtoday.com.

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