Employer’s Ultimatum to Accept Changes or Quit Backfires

Daniel Standing LL.B., Editor, First Reference Inc.

In McLean v Dynacast Ltd., 2019 ONSC 7146 (CanLII), the employer drastically changed the plaintiff’s job and forced him to accept the new arrangement or quit. The plaintiff chose the latter option and successfully sued for constructive dismissal. In accepting the plaintiff’s claim, the court summarized recent case law on mitigation, and awarded significant aggravated or moral damages to the plaintiff.

Background

The plaintiff, Christopher McLean, began working for the defendant, Dynacast Ltd., in 1982. The defendant was a large corporation that made and sold metal parts. The plaintiff is a reliable, knowledgeable and highly skilled employee who worked full time in various unionized positions performing quality testing and servicing work. In these roles, he worked on the shop floor each day and without complaint. This was a challenging environment: the temperature could reach 40°C, there were burn hazards, constantly high noise levels and risk of smoke inhalation.

In 2010, he was promoted to the non-union role of sales and service technician. At that time, the parties signed a letter explaining Mr. McLean’s position, salary and benefits. The letter, which the court considered to be an employment contract, also contained a non-modification clause. The plaintiff enjoyed his new position immensely. Removed from the shop floor, he was given a small, quiet, air-conditioned office where he troubleshot and tested equipment. He was also responsible for managing customers’ needs, expanding the company’s sales, and visiting customers’ plants, which involved international travel.

The plaintiff testified that one Friday in January 2017, he had to attend a meeting with his immediate supervisor, the plant manager and the plant’s human resources specialist. The manager, Doug Montgomery, told Mr. McLean that because of poor sales figures he would be given a new position refurbishing equipment on the shop floor. He was to relinquish his sales and service tasks and his office to a co-worker. He was offered a bonus structure that he felt was unattainable. He was given a written job offer entitled “position profile” and was encouraged to sign it. Mr. McLean became upset while reviewing the document over the weekend. The position described what the unionized maintenance staff did every day. Suspiciously, the letters, “BU” appeared at the bottom-letters he understood to represent “Bargaining Unit.” The following Monday, the human resources specialist, Jennifer McKeiver, told him that his failure to sign the document would be treated as his resignation. When he told Mr. Montgomery of his concerns about the bonus structure and the bargaining nature of the work, Mr. Montgomery responded that Mr. McLean “does not dictate what Dynacast will do, Dynacast dictates what you will do.” The employer maintained its ultimatum and told Mr. McLean that his reassignment would start the following Monday. Mr. McLean sought legal advice and two days later, advised the employer that he would remove his personal belongings from the plant.

At trial, Mr. Montgomery and Ms. McKeiver tried to undermine Mr. McLean’s evidence on several key points. However, the judge was not convinced and concluded that the evidence each of them offered was unreliable. Mr. Montgomery’s evidence was full of contradictions and inconsistencies. At times, he was argumentative, confrontational, evasive and quibbling in his testimony. The judge found that Ms. McKeiver had been influenced considerably by Mr. Montgomery; she did whatever her employer told her to do during the so-called “realignment process.” Her evidence was heavily biased and her characterization of the wholesale changes to Mr. McLean’s position as being just a “minor tweak” undermined the reliability of her evidence.

The judge’s decision

Turning to the law, the judge first addressed the issue of constructive dismissal. According to the Supreme Court of Canada, a two-step test is used to determine if an employer’s conduct shows an intention to no longer be bound by the employment contract. First, the court must consider whether the employer’s unilateral change amounts to a breach of the contract. If it does, then the court will consider whether the employer’s ongoing conduct demonstrates an intention to no longer be bound by the contract.

The court found that the company’s ultimatum to Mr. McLean breached the non-modification clause of the 2010 contract. A comparison of key elements of the sales and service technician position and the one Mr. McLean was forced to accept led the judge to conclude that a reasonable person in Mr. McLean’s situation would feel that the essential terms of employment were substantially changed. This was not just a “minor tweak” and Mr. McLean’s loss of faith in his employer was justified. The court had no difficulty concluding that Mr. McLean was constructively dismissed.

The next legal issue for the court was the amount of reasonable notice of termination that Mr. McLean should have received. Mr. McLean’s contract stipulated that if his employment was terminated without cause, he would be remunerated in accordance with the Employment Standards Act. Despite this, the court found that the provision did not show a clear intention to displace common-law notice. Various authorities indicated that any ambiguity in the termination clause should be resolved in the employee’s favour. Applying that principle, the court found that Mr. McLean was entitled to receive notice under common law. Taking account of prior case law, as well as the plaintiff’s position, length of service, age, experience and qualifications, the court fixed the notice period at 28 months.

Turning to the issue of mitigation, the court noted that as a general rule, where there are no barriers to re-employment, a dismissed employee must mitigate his or her damages by returning to work for the same employer. The question of barriers is determined objectively: Would a reasonable person in the employee’s position accept the alternative employment? Case law has shown that a loss of prestige or a change that would likely be seen as a demotion and lead to embarrassment are legitimate barriers. The court found that Mr. McLean would have been humiliated and embarrassed in the new position. Mr. Montgomery’s comment about who would dictate to whom was clear and cogent evidence that the employment relationship had become poisoned and acrimonious. Therefore, the court found that a reasonable person in Mr. McLean’s shoes would not have accepted the alternate employment that was offered.

Mr. McLean was found to have made reasonable efforts at finding comparable alternate employment but given his age and his time out of the job market, he was largely unsuccessful. The court held that the income from certain of his mitigation efforts was held to be properly deducted from the common-law notice period.

The court concluded its judgment on the issue of damages for the employer’s bad faith conduct. The judge held that the employer was less than candid, honest and forthright in its dealings with Mr. McLean. It put unreasonable pressure on him, causing mental distress, depression and anxiety. In recognition of this, aggravated or moral damages were assessed at $25,000.

Takeaways for employers

Changing an employee’s job duties is always a risky venture. The risk increases exponentially when the changes are major ones, executed unfairly and contrary to a provision of an employment contract prohibiting unilateral changes. Any interactions between an employer and its employees should be carried out with civility and respect and special care should be taken in this respect when dealing with major reorganizations or restructuring initiatives. In this case, the employer took the opposite approach, pressuring a long-standing employee into accepting an inferior and vastly different position under threat of termination. Its strategy backfired impressively, exposing it to significant damages in excess of the common-law notice period. A better approach would have been one that prioritized civility, consensus-seeking and respect of employment contract provisions. Dynacast Ltd. learned this lesson the hard way.