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Employee’s options after constructive dismissal

What does an employee do if she has been constructively dismissed but has not been told to leave her employ? Is she still entitled to continue to work for the employer and look for alternative employment? Is she obligated to do so? It has been the law in Canada since the Supreme Court of Canada decision in Evans v. Teamsters Local No. 31 decided in 2008 that an employee’s obligation to make reasonable efforts to mitigate her losses, included returning to the employ of the employer who dismissed her, so long as there is no obvious barrier to such a return to work.

questions-optionsThe question of whether such a return to work will be considered as acceptance of the employer’s unilateral change in working conditions was considered by the Ontario Court in a decision released on November 2, 2010. In the decision of Russo v. Kerr Brothers Limited, Justice Grey considered the case of a fifty-three year old employee who had been working for his employer for thirty-seven years. The employee had never completed high school, and the only formal training or education he received was that of his on the job training in the course of his employment. He had worked his way up through the company to become a Warehouse Manager.

In 2009, the company ran into financial trouble and hired a new president to attempt to resolve the company’s financial problems, in part by cutting the company’s expenses. One of the first things which the new president discovered is that the company salary scale was significantly above market for employees with similar qualifications and responsibilities. After imposing an across-the board 10% reduction in all compensation, the new president determined that the Plaintiff’s salary was significantly above market and unilaterally reduced his salary from $114,000.00 to $60,000.00 per year.

Not surprisingly, the Plaintiff immediately went to see a lawyer. He was advised that the unilateral and substantial reduction in his compensation constituted constructive dismissal. His lawyer took the position that he was going to continue working for the Defendant as part of his obligation to mitigate his damages but was not accepting the new terms of employment.

While the Defendant acknowledged that the Plaintiff’s lawyer had advised him of the terms under which he was continuing to work, the Defendant took the position at trial that the Plaintiff was obligated, within a reasonable period of time, to make an election as to whether to accept the new terms of employment, or accept the dismissal and cease working. The Defendant argued that when the Plaintiff chose neither of those two options, he was deemed to have accepted the new terms of employment. In rejecting the defendant’s argument, the judge cited decisions of the Ontario Court of Appeal for the principle that an employee is entitled to reject the imposition of new terms of employment, and, while continuing to work, may sue to enforce the original terms of employment. The judge found that there was no reason why the employee could not, in principle, remain in his employment under the new terms while still disputing the applicability of these terms.

Finally, in an interesting twist, the trial judge considered the Defendant’s argument that the Plaintiff was required to make an election of whether to accept the terms or leave. The trial judge rejected that argument and held that, in fact, it was the Defendant who was required to make an election. Once the Defendant was advised that the Plaintiff was taking a position that he had been constructively dismissed, and did not accept the new terms of employment, the Defendant had the option of requiring the Plaintiff to leave its employ, or to maintain the old terms and conditions for the period of reasonable notice. However, according to the judge the Plaintiff could not remain in the Defendant’s employ indefinitely. Rather he was entitled to remain under the new terms of employment, but only for the period of reasonable notice.

Finally, the judge considered the Plaintiff’s age, being 53 years old, and his 37 years of service to the Defendant to fix the notice period at 22 months.

While the judge’s reasoning is technically sound, one has to wonder as to the practicalities of the dismissed employee continuing to work for the employer, particularly under terms which are significantly less advantageous than his old terms of employment. The judge’s reasoning seems to ignore the obvious difficulty which the employee, and the employer, would encounter in maintaining their ongoing relationship in the face of the employer’s actions.

Earl Altman
Garfinkle, Biderman LLP

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Earl Altman

Legal consultant at EA Consulting
Earl Altman was a partner at Garfinkle, Biderman and now heads his own consulting firm. Earl has practiced commercial and employment litigation. Earl’s practice focuses on employment disputes, including acting for employees and employers in wrongful dismissal claims, and in breach of contract and breach of fiduciary duty claims. Read more
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