Written By Michael VanderMeer, John Gilmore and Talia Bregman
- A constructive dismissal does not occur automatically just because an employer has unilaterally changed a key term of employment—the employee must reject the change.
- The employee must reject the change to their employment within a reasonable period of time, otherwise they will be considered to have agreed to it.
- What constitutes a "reasonable period of time" may vary based on individual circumstances, the nature of the change, and the jurisdiction, but according to a recent Alberta Court of Appeal decision, employees in Alberta should not expect to have longer than two or three weeks to reject substantial changes to their compensation.
In most cases, if an employer unilaterally and substantially changes an essential term of employment an employee is not required to accept the change. The employee has the option of rejecting the change and claiming that they have been constructively dismissed at common law, even if the employer has not outright dismissed the employee. If an employee is constructively dismissed, it is the same as if the employee has been terminated on a without cause basis and an employer's severance obligations will then be triggered.
However, if the employee wishes to claim that the change to their employment constitutes a constructive dismissal, they must act quickly. If they wait longer than what a court considers to be reasonable, they could be deemed to have accepted or condoned the change. A recent decision from the Alberta Court of Appeal in Kosteckyj v Paramount Resources Ltd, 2022 ABCA 230 [Kosteckyj] is noteworthy in that it underscores the consequences for an employee failing to act rapidly in the face of this kind of change. The decision also articulates some of the factors that could lengthen or shorten the amount of time an employee has to react to a substantial alteration of a term of employment.
Under Canadian common law, a non-union employee can claim constructive dismissal in two scenarios:
- Single unilateral change: If the employer violates an essential term of the employee's employment contract, for example, by substantially reducing the employee's compensation.
- Course of conduct: If the employer demonstrates through its conduct that it does not intend to follow the terms of the employee's employment contract, for example, by subjecting the employee to a toxic work environment.
Whether a unilateral change or course of conduct amounts to constructive dismissal requires an objective analysis. In other words, it is not enough for an employee to simply believe that their employer has violated the employment contract; rather, it must be proven by the employee on an objective basis. In addition, the changes or breach in question must be significant and to the employee's detriment.
The Facts in This Case
In Kosteckyj, the plaintiff was an Alberta-based employee who had worked for the defendant for around six and a half years. To cut costs, the employer introduced across-the-board reductions to employee compensation. The plaintiff's base salary was lowered by 10 percent, her bonus was delayed or cancelled, she lost access to training and seminars, and the employer stopped making RRSP contributions on her behalf.
Despite being unhappy about the changes, the plaintiff continued to work from the office and perform her duties and did not communicate her unhappiness about the changes to her employer. Approximately three weeks later, the employer dismissed her and a number of her co-workers on a without cause basis.
The plaintiff sued, and argued that she had been constructively dismissed as of the date the changes to her compensation were first made. Therefore, the plaintiff claimed damages based on her original and unreduced compensation before the constructive dismissal.
On appeal, the Alberta Court of Appeal accepted that the changes to the plaintiff's employment were sufficient to ground a claim of constructive dismissal. However, the Court concluded that the plaintiff acquiesced to the fundamental changes because she did not object to those changes within a reasonable period of time.
In deciding what would be considered a "reasonable period of time", the Court acknowledged that this could vary depending on both the characteristics of the employee as well as the nature of the changes to their employment. Nonetheless, an employee who finds themselves in this position must act quickly: "A worker who confronts dramatically different conditions of employment also needs to decide promptly if he or she wishes to continue as an employee." The Court concluded that 10 business days should have been a sufficient period of time for her to decide whether she would accept or reject the changes.
Notably, the Court gave no weight to the length or brevity of the plaintiff's tenure with the employer, commenting that where all other factors are the same, both short-service and long-service employees are equally required to decide whether they should accept or reject unilateral changes to their employment in prompt fashion.
The Court also indicated that while another employee who lacked the plaintiff's wherewithal might be justified in taking more time to make their decision, "it would be a rare case that a reasonable period would exceed fifteen business days."
Even though it was undeniable that the employer had acted unilaterally to fundamentally alter the plaintiff's terms of employment for the worse, the plaintiff could not prove that she had rejected the changes within a reasonable period of time. Therefore, she could not rely on a claim of constructive dismissal as she was deemed to have accepted the changes. Her damages were then calculated as of the date on which her employer dismissed her and based on her reduced compensation.
While Kosteckyj, is helpful for employers in Alberta, it should be noted that this decision is not binding on courts in other jurisdictions and those courts may approach this issue differently.
Whether changes to terms of employment could constitute grounds for a successful claim of constructive dismissal depends on many factors, and will vary case-by-case and may also vary jurisdiction-by-jurisdiction.
Regardless, Kosteckyj, provides a reminder that even if those grounds exist, that itself does not mean that an employee is in a position to claim that they have been constructively dismissed.
An employee who wishes to claim constructive dismissal has the onus of proving that they acted within a "reasonable period of time" to decisively reject the change. If they cannot do so, a court is likely to infer that the employee decided that they would prefer to remain employed even under the worsened terms, and have therefore tacitly accepted the changes, which then become binding.
What precisely constitutes a reasonable period of time could vary based on factors including the nature, severity, and clarity of the changes themselves, as well as the employee's level of sophistication, and other factors that could affect the employee's ability to consider and respond to the changes (such as a pressing medical issue or the state of the job market).
Whatever the jurisdiction, if you are an employer and considering implementing changes in your workplace, or are facing a situation where an employee is claiming to have been constructively dismissed, please contact the Bennett Jones Employment Services group.