When most people think about termination in the employment context, the issue of “cause” often comes to mind first. This is unsurprising given that a termination without cause imposes obligations on the employer to either provide reasonable notice or pay in lieu of notice to a departing employee. However, there is another much less obvious way by which an employer can, in effect, terminate the employment relationship without outright advising the employee that they have been dismissed. This is referred to as “constructive dismissal”.
General Comments on Constructive Dismissal
Canadian common law currently recognizes two different scenarios in which a constructive dismissal can occur. The first is where an employer makes a unilateral change to a fundamental term of the employment contract. The second, much more general situation is where an employer engages in a course of conduct which shows that the employer does not intend to be bound by the terms of the employment contract. If an employee manages to successfully make out a claim for constructive dismissal, the employee will be entitled to the notice or pay in lieu of notice that would have been required for a without cause termination.
Even though an employer may have altered a fundamental term of the employment contract, this is not enough in and of itself to argue constructive dismissal. An employee must reject the change within a reasonable period of time, or risk being considered to have acquiesced to the change.
With the foregoing in mind, how should an employee react when they find out that the employer has changed a fundamental term? An employee is not necessarily expected to make a decision immediately, but a “reasonable period of time” is not infinite. This is where the Alberta Court of Appeal has recently shed some light in its decision of Kosteckyj v Paramount Resources Ltd. (2022 ABCA 230).
The employee, Ms. Kosteckyj, had been employed as a professional engineer with her employer, Paramount Resources, for roughly seven years when she alleged that fundamental changes were made to the terms of her employment.
On March 27, 2020, Ms. Kosteckyj was advised that Paramount Resources would be implementing a “cost reduction program” effective April 1, 2020. The program would (i) reduce her salary by 10%, (ii) suspend her RRSP contributions, (iii) delay or cancel her bonus, and (iv) remove her access to further seminars or training.
On April 22, 2020, Paramount Resources decided to terminate Ms. Kosteckyj without cause and paid her five weeks’ pay in lieu of notice at her reduced salary under the cost reduction program. Shortly thereafter, Ms. Kosteckyj started a wrongful dismissal lawsuit against Paramount Resources arguing that she should have received another twelve months of severance and that her severance should be calculated based on her compensation package prior to the cost reduction program being implemented.
The Alberta Court of Queen’s Bench found that the cost reduction program was a unilateral change to the terms of Ms. Kosteckyj employment and, further, that there was no requirement for her to reject the change in the 25 days between her being informed of the program and her firing.
Although the Alberta Court of Appeal agreed that the cost reduction program unilaterally changed the terms of Ms. Kosteckyj’s employment, it found that Ms. Kosteckyj had acquiesced to and accepted the changes brought on by the cost reduction program. The key findings of the Court were as follows:
- What is considered a “reasonable period of time” to reject the change will vary depending on a number of different factors, including the changes themselves, the employee’s personal attributes, and the state of the job market. An employee’s length of service is irrelevant to this analysis.
- An individual in Ms. Kosteckyj’s situation would have no more than 10 business days to determine whether to reject the changes brought on by the program. A different time period could apply where (i) an employee’s personal attributes require more time to assess the situation, or (ii) where the employer physically relocates or imposes different work duties on the employee. That said, rarely will the reasonable time to reject the change be more than 15 business days.
- Even if the reasonable period of time to reject the change had not expired, Ms. Kosteckyj was required to lead some evidence to prove that she had refused to accept the changes.
- By continuing to work for three weeks after finding out about the program and failing to notify her employer that she was rejecting the changes, Ms. Kosteckyj had acquiesced to and accepted the changes.
In making its finding in the Kosteckyj decision, the Alberta Court of Appeal has opted for a more certain and predictable approach to handling constructive dismissal claims. However, each set of circumstances will need to be assessed on a case-by-case basis to determine what the reasonable time period to reject unilateral changes is.
This article offers a mere glimpse into the complexities of constructive dismissal claims. Whether you are an employer thinking of implementing changes to the terms of employment or an employee who is faced with such changes, we highly recommend contacting the employment lawyers at Stillman LLP for guidance.
By Taylor Maxston
Note: This article provides general commentary and is in no way intended to replace the need to consult with a legal professional concerning the specific circumstances of your situation. This article should not be construed or relied upon as legal advice.