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There is more to a job than compensation

It has always been clear in Ontario law that employers cannot unilaterally alter the most important aspects of the employment contract – compensation, location of work, hours of work – without the employee’s consent or providing adequate advance notice of the change. If it does, it may lead to a claim of constructive dismissal. But what if the change imposed in the contract is not as important as some of these? How can the employee respond to a change in his position that he perceives to be a demotion, even if the title remains the same.

In determining whether constructive dismissal has occurred as a result of a change in position, the courts have considered whether there has been a substantially reduction in managerial responsibilities, change in office allocation, or actual change in the employee’s leadership role. The courts have also considered whether the employee continued to have others reporting to her, or whether her responsibilities had changed. Where the court finds that such changes have been imposed, it would generally find that a constructive dismissal has occurred. If the employee has been constructively dismissed, the damages payable are the same as in an actual dismissal, with a caveat that the employee may be required to continue in the role as part of her duty to mitigate. Mitigation earnings will, of course, reduce the damages payable.

In such cases, the difficulty often lies in determining whether the new position to which the employee is assigned is, in fact, a demotion sufficient to support an argument of constructive dismissal. This issue is considered in a recent decision of the Ontario Superior Court which also highlighted the problem of poorly defined job titles. In this case, [Jodoin v. Nissan Canada Inc., 2013 ONSC 4683], the employee had been working at Nissan since November 2000. He had held a series of management positions in Montreal and Toronto. In 2010, he was transferred to a new position in Toronto with the title of Senior Manager Vehicle Participation Program. According to the evidence presented at trial, Nissan had not adequately prepared for the plaintiff’s new role, as there was no job description, no employees reporting to him, no office, and no budget for the role. Jodoin was told that he would now be working in a cubicle, where he had worked in a private office in his previous position. Based on the change in working conditions and the lack of definition of the new role, Jodoin argued that he had been constructively dismissed.

The judge focused on Nissan’s failure to have what he called a “…concrete plan for the new position,” even a month after the reassignment. The judge rejected Nissan’s argument that the change was, in fact, a lateral move and that the employee’s compensation had not changed. He focused on the actual tasks the employee was responsible for, the budget he was given, and his reporting requirements. In his new role, the employee had no budget and few responsibilities. In addition, the evidence called by the employee at trial demonstrated that a different employee had, in fact, taken over many of his previous duties following his reassignment. Finally, the evidence showed that Nissan had failed to respond to the employee’s repeated requests that it clarify his long term goals in the new position.

In finding that the employee had been constructively dismissed, the court applied a “reasonable person” test: whether a reasonable person in the same situation as the employee “would have felt that the essential terms of the employment contract had been substantially changed.” The judge concluded that the terms had been changed. He found that the only thing that was not changed was the employee’s salary. Having looked at the employee’s responsibilities, he felt the title he had been given was a “hollow term”. Although he was called a Senior Manager, he had nothing to manage. The judge also relied on the fact that the employee’s office was taken away and that all of his direct reports had been reassigned. The judge rejected Nissan’s characterization of the change as a lateral move, implemented in order to improve sales and revenues. He referred to the evidence of Nissan’s Director of Sales that the goal of the new role was “…to put ink to paper to become much more serious to leverage the pool…” Perhaps the obscurity of the description convinced the judge that Nissan had no idea what the position actually involved.

The judge then went on to consider whether the employee was required to accept the new position with Nissan as part of his duty to mitigate his damages. In concluding that the employee was within his rights to reject the position, the judge found that the new position had “…no job description, no long term goals, no budget, no office and nothing to manage,” the employee was therefore faced with a job that he could not do. Accordingly, the judge awarded damages to the employee in compensation of lost salary and benefits totaling $102,198. The employee was also entitled to his costs.

What is the take away from this decision: employers are not entitled to change an employee’s actual duties, or reassign employees to new positions, without careful consideration of the employee’s rights, and the role they are being asked to undertake. Trying to cover up the change with an inflated job title will not shield the employer from liability. Particularly in senior positions, careful consideration of the employee’s duties and responsibilities should be undertaken before such reassignment is made.

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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