Northern Exposure

Not all changes equal constructive dismissal

by Mathias Link

Employers throughout Canada find it challenging to anticipate exactly when a particular unilateral change to the terms and conditions of employment will be a breach of the employment contract, and thus a constructive dismissal, or whether the change will be reasonable such that an employee is obligated to accept the change or changes.

The Supreme Court of Canada set out the test for determining whether or not an employee has been constructively dismissed in 1997 in Farber v. Royal Trust Co. But uncertainty continues to exist.

Constructive dismissal

Unilateral changes to terms and conditions of employment that have resulted in findings of constructive dismissal by courts and employment standards adjudicators often involve changes to compensation or location. Reductions in compensation have often led to constructive dismissal findings. And transfers of employees to a different geographical work location where the new work location is a significant distance away from the former location have led to similar results.

However, a recent Canada Labour Code unjust dismissal complaint decision of adjudicator Barry B. Fisher confirms that, depending upon the circumstances, unilateral changes may be made to terms and conditions of employment in both of these areas without triggering a constructive dismissal.

Facts

In Lawson v. First Canada ULC (May 4, 2015), the employee was a transit bus mechanic employed by a transit services company employer from December 2000 to February 2012. He commenced employment at the employer’s Thornhill, Ontario, location and worked there for four years. At that time, the employee lived in Sutton, Ontario, a commute of 68 kilometers each way.

The employee then moved to Newmarket, Ontario. After moving to Newmarket, he continued to work at the employer’s Thornhill location with his commute now being 38 kilometers each way. In 2004, he sought and received a transfer to the employer’s Newmarket location, and his commute was reduced to only a few kilometers from his home.

In late January 2012, the employer announced that it had lost a contract to provide transit services out of its Newmarket location. Within a few days of the announcement, however, the employee was contacted by the company that was to take over the transit services contract lost by his employer. The employee applied for and was offered a mechanic position with the new company a few days later, and he accepted the job. The terms of the offer of employment with the new company included keeping his same position and maintaining his same wage rate.

Ten days after accepting the job with the new company, the employee received a letter from his previous employer, which offered him a transfer to a mechanic position at its Thornhill branch where he had previously worked from 2000 to 2004. While the transfer included a reduction in hourly wages of approximately 6.9 percent, the employer also offered him a one-time lump sum payment that would have made up the wage differential for a period of 48 weeks.

The employee told his old employer that he did not wish to accept the transfer. He handed in a written letter of resignation providing seven days’ notice. A few days later, he began working at his new company as a mechanic.

Claim

Approximately two months later, when the employer closed its Newmarket location, employees who were not offered alternate jobs and who worked until the location closure were provided with notice of termination and severance pay pursuant to the Canada Labour Code.

When the complaining employee found out that employees who stayed to the end received termination and severance pay, which he did not, he filed a complaint of unjust dismissal.

Decision

In his decision, adjudicator Fisher decided that in order to be entitled to termination and severance pay, the complaining employee had to prove that he was either dismissed outright or constructively dismissed. The adjudicator decided that he was not dismissed outright. That may have happened if he had remained with the employer until the closure of the Newmarket facility, but the complaining employee “jumped the gun” by departing when he did.

The adjudicator then reviewed whether or not a constructive dismissal had occurred. He noted that the test for whether or not an employee is constructively dismissed is an objective one. In other words, “would a reasonable person have accepted the reduction in wages and transfer to the Thornhill branch?”

The adjudicator noted that the wage loss would not have effectively been implemented for 11 months, given the lump sum payment that was part of the transfer offer. At that point, the wage gap would be even less, as the position at the Thornhill location was unionized and subject to an annual wage increase. In short, the wage gap following 11 months of employment would have been reduced to approximately 5.8 percent—overall a modest reduction in compensation.

With respect to the longer commute time, the adjudicator pointed out that the employee had commuted this distance and longer in the past. He also noted that many people in the Greater Toronto area commute 38 kilometers or more each way to work. And that while the commute time from his home to the Thornhill branch would be 29 minutes each way, that is less than the time an average Toronto area commuter spends commuting. According to a study done in 2014 by the Canadian Index of Well-Being, the average commute takes 65.6 minutes a day.

Finally, the adjudicator noted that the employee already had accepted employment with the new company before he even received the offer of a transfer from his previous employer. In accepting employment with the new company, he ensured that his commute time was minimal and he kept the same wage and working conditions.

However, the adjudicator noted that the test for a constructive dismissal does not include a comparison of the two job prospects (the transfer to Thornhill with his previous employer versus remaining in Newmarket with the new company). Rather, the test was whether the job transfer offer by the previous employer was comparable to his previous position with the same employer.

Taking all of the above into consideration, the adjudicator decided that the Thornhill position with the previous employer was comparable to the previous Newmarket position. In short, none of the changes to his position would constitute a “fundamental negative change” to the employee’s employment. He was not constructively dismissed. And the complaint of unjust dismissal was dismissed.

Implications for employers

This case reinforces that a constructive dismissal analysis in Canada is not a “one size fits all” exercise. Not all changes to the terms and conditions of employment will necessarily constitute a constructive dismissal. Depending upon the circumstances, even in the event of a loss of position, an offer of a transfer to another location and/or a modest reduction in compensation may be considered to be comparable alternative employment that an employee is obligated to accept. Although a decision by an adjudicator under the Canada Labour Code, the decision is sure to impact judges and employment standards adjudicators across Canada.