If an employer unilaterally negatively changes an employee’s terms of employment, the employee has the option to reject the change, quit and claim severance under the doctrine of “constructive dismissal”. However, case law has recognized that, if the employee fails to dispute or question the change within a reasonable period, the employee has ‘condoned’ (i.e. accepted) the change and can no longer claim constructive dismissal. In the recent Alberta Court of Appeal case, Kosteckyj v Paramount Resources Ltd, the court set a surprisingly short deadline for employee to dispute a unilateral change.
The plaintiff in that case was a professional engineer. On April 1, 2020, the defendant substantially reduced the plaintiff’s compensation package to an extent that clearly constituted a constructive dismissal. This was no April Fool’s joke. The plaintiff continued to work without complaint until she was terminated on April 22, 2020—only 3 weeks later. The trial judge determined that the unilateral reduction of the employee’s compensation amounted to a constructive dismissal and so calculated the employee’s severance award on the basis of her original compensation package before the reduction.
On appeal, the Court of Appeal disagreed with the trial judge, finding instead that the employee had acquiesced or condoned the reduction in pay, as she carried on working for three weeks without indicating that she did not accept those terms. For that reason, the Court ruled that the employee’s damages should be assessed at the reduced rate, as she had condoned the change before her eventual termination.
In writing the decision, Justice Wakeling stated that no more than 10 business days should have been sufficient for a professional engineer and a “healthy, knowledgeable, and informed person” to make an informed decision on rejecting or accepting the new employment terms and that 15 business days would be sufficient in most other cases. The two other judges concurred with Wakeling but disagreed with the strict application of a 10/15 business day deadline for finding condonation that he suggested. However, they agreed that overall in this case the amount of time (i.e. 21 days) was a sufficiently reasonable amount of time for this employee to consider her options and raise an objection. Thus, at least in Alberta, it appears that employees will need to determine within approximately three weeks (or longer in some instances) whether they will accept or reject a unilateral change of their terms of employment and communicate their objection.
In other provinces, the courts have been more lenient, allowing employees up to several months to object to a material reduction in terms of employment. While this case must be followed in Alberta, we believe that in other provinces, each situation will be assessed on a case-by-case basis, including considering whether the employee provided a reasonable explanation for the delay e.g. clarifying or assessing the impact of a change such as a change in role or duties or taking time to obtain legal advice.
The decision in Kosteckyi seems particularly unfair. Although the case does not mention any evidence on this point, it seems likely the employee may have hesitated to object to the reduction in pay on the reasonable assumption that, by doing so, she would be able to keep her job. Instead, she was terminated. Given the timing of the two decisions by her employer, it seems the employer wanted to deliver a one-two punch: first reduce pay then terminate and pay severance at the lower pay rate to save on severance. Being terminated after tacitly accepting a pay cut and then having her severance set at the reduced pay rate only adds insult to injury for this employee.
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