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Constructive Dismissal After COVID-19 CHRIS DRINOVZ The impact of COVID-19 on the workplace has been enormous. Employers have had to make significant changes to their operations to survive. This may necessarily have included modifying working conditions of returning employees to fit the new reality. While often practical for the bottom line, such changes may result in claims of constructive dismissal. This article describes what that is and best practices for avoiding such claims.
It is unclear whether the test will change for cases decided in the post-COVID world but in our view, courts may be far more sympathetic to employers when changes were necessitated in order to continue in business.
Best practices The following considerations may reduce the risk of a constructive dismissal claim: • Provide advance notice of any significant changes; where possible, the amount of notice should be equivalent to the amount of reasonable notice the employee would receive for termination without cause; • If notice cannot be provided, offer the employee something of value in exchange for the changes; for example, a small bonus upon returning to normal operations;
What is constructive dismissal? Constructive dismissal arises when an employer makes a change to the employee’s working conditions so fundamental that it amounts to a rejection of the original employment contract. In such cases, the employee may choose to end the relationship and claim pay in lieu as if they had been terminated without cause in the traditional sense. To meet the test for constructive dismissal, the change in working conditions must be both unilateral (without employee consent) and material (minor changes are generally permitted to meet the needs of the business and adapt to market conditions). While each case turns on its own unique facts, examples of constructive dismissal can include: reduction in pay or benefits, demotion, relocation, change in job title or responsibilities, change in working hours, or toxic workplace caused by discrimination and/or harassment.
What is a material change in pay? The courts have said generally that a salary reduction of up to 10 per cent would not be a fundamental breach; a reduction of 14-17 per cent may be one if combined with another substantial change, and any reduction beyond 20 per cent is a fundamental breach on its own. In the recent case of Wiltse v. Seastar Chemicals ULC, 2020 BCSC 658, the employer attempted to modify the employee’s annual bonus structure to cap it at 10 per cent of base salary, where in the past the bonus had been as high as 35 per cent. The court found this was a constructive dismissal and awarded 16 months’ severance pay in addition to substantial legal costs.
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Signals Magazine July–September 2020
• Obtain the employee’s written consent to the proposed change. In the absence of express consent, the employee’s agreement may be implied if they continue to work under the altered terms without complaint. For changes in position or duties, consider offering a new employment contract. • If the employee refuses to accept the proposed change, continue to offer that position as the employee may be bound to accept the new pay structure in mitigation of their damages. Chris Drinovz is the head of the Employment & Labour Group at Kane Shannon Weiler LLP. Should you have any questions about constructive dismissal, please contact cdd@ksw.bc.ca. Disclaimer: This is not legal advice. Please contact your legal professional for advice on your particular circumstances.
