The Need to Act Fast in the Face of Major Change

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

The law doesn’t easily tolerate those who sleep on their rights. In the world of wrongful dismissal, the adage “you snooze, you lose” rings particularly true. A recent decision of the Court of Appeal for Alberta (2022 ABCA 230) illustrates how an employee’s delayed objection to significantly changed terms of employment can leave them stuck with the changes. The court also provides helpful advice about factors that might serve to lengthen or shorten the amount of time an employee has to think before choosing to act.

Background

The former employee at the centre of the case worked as a professional engineer earning about $155,000 annually. In the early days of the pandemic, her employer announced that it was implementing a “cost reduction program” to take effect on April 1, 2020, which, for the employee, meant a 10 percent reduction in salary and other negative impacts on her remuneration. Despite the bad news, the employee kept working until April 22, when the employer terminated her employment as part of its further efforts to cut costs. The company gave her the statutory termination pay of five weeks’ salary.

The employee responded by suing for wrongful dismissal, basing her damages claim on the salary she earned before it was reduced. At the summary trial, the judge agreed with the employee that she’d been constructively dismissed. Of key relevance for present purposes, the judge said the employee had no obligation to decide whether the salary reduction was a repudiation of the contract in the intervening 25 days between her being informed of the salary change and her termination. The judge awarded the employee nine months’ notice based on her pre-reduction salary.

The appeal decision

The Court of Appeal agreed with the court below that the April 1 changes were substantial enough to give rise to a constructive dismissal. But critically-and this was no April Fool’s joke-it said that by working for three more weeks without complaint doing the same tasks in the same office, she had effectively accepted the reduced level of compensation. Constructive dismissal requires the employee to reject the new terms of employment within a reasonable time, and the court said that ten business days was enough time for someone as healthy, knowledgeable and informed as the employee to decide whether she would accept the employer’s unilateral actions.

The court said that depending on the attributes of the employee (i.e., someone less sophisticated or perhaps who is unwell), more time might be required to make a “prudent and informed decision,” but that it would be rare for more than 15 days to be reasonable.

Since the judge below made an error in holding that the employee was constructively dismissed on April 1, a new damages assessment had to be done using the revised compensation level, ultimately leaving the employee with about $10,000 fewer dollars as a result of the appeal.

Key takeaways

This is a positive case for employers since it recognizes the urgency of the situation employers face when, for business reasons, they cut costs and reduce staffing levels. In those situations, the employer needs to know quickly which employees are staying, and which are not. Employees who quietly continue working under the new arrangement may, after a few weeks, find themselves stuck with the changes, whether they like them or not. By then, it will probably be too late to complain.

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