Constructive dismissal without dismissal

Will recent decision start a trend of employees not accepting changes but continuing to work?

By Jeffrey R. Smith (jeffrey.r.smith@thomsonreuters.com)

When someone starts a job, she usually has a good idea what to expect with regards to job duties, pay and working environment. At least she should, and the employer should convey that information through the job interview, orientation and the formal job offer.

A basic concept in employment law is that if the employer makes any fundamental negative change to a term or condition of employment, such as job duties or pay, it constitutes a repudiation of the employment contract and the employee can claim constructive dismissal. An employer can reduce the risk of this situation by including the possibility of these types of changes in the employment contract. If it’s part of the employment contract, the employee should be prepared for the possibility of changes and consider them a part of the job. This is especially important in lines of work where frequent moving and restructuring are common.

In most cases, when an employee claims constructive dismissal through a repudiation of the employment contract, she indicates her refusal to accept the changes by leaving her employment and filing the claim. It’s been largely accepted in courts and legal circles that employees who continue working are accepting the changes in their employment contract and the new conditions become part of a new employment contract with no constructive dismissal. However, this may be changing and an employee who keeps working could still be in line for constructive dismissal damages, despite the awkwardness of her continued presence in the workplace.

Recently, the Ontario Superior Court of Justice ruled an employee of Toronto-based candy company Kerr Bros., was constructively dismissed, despite the fact he never left the company. The company had been going through financial difficulties and pared salaries in response, including cutting the long-time manager’s pay by almost half. The manager got a lawyer, who formally wrote to Kerr Bros., indicating the manager did not accept the pay reduction and was filing a constructive dismissal claim. However, the manager continued to work as usual in his regular job as he commenced the action.

Kerr Bros. tried to argue the manager accepted the changes by staying on and working for the new salary, but the court disagreed. The court said the manager made it clear through the letter from legal counsel that he didn’t accept the new salary and was pursuing legal action, even though he was still working. The court said the employer could only assume he accepted the change if he did nothing.

So employers should be aware a constructive dismissal complaint won’t necessarily be denied if the employer doesn’t leave the job. It’s important to pay attention to how the employee reacts and communicates with the employer. What could this mean for the workplace environment and productivity? Is it technically constructive dismissal if there is no actual dismissal? What is the time limit after a fundamental change to the job before an employee who keeps working can claim constructive dismissal?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. For more information, visit http://www.employmentlawtoday.com.

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