Canadian Employment Law Today

August 15, 2018

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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Have a question for our experts? Email Canadian HR Reporter, a Thomson Reuters business 2018 2 | August 15, 2018 Answer: When an employer unilaterally changes an employee's employment con- tract or applicable policies, it should always consider the doctrine of constructive dis- missal. Constructive dismissal occurs when an employer indicates an intention to no lon- ger be bound by the employment contract by fundamentally changing its terms. An employee who successfully claims construc- tive dismissal is entitled to damages in lieu of reasonable notice of termination, subject to their duty to mitigate. In Potter v. New Brunswick (Legal Aid Ser- vices Commission), the Supreme Court of Canada affi rmed the following two-staged test that an employee must make out in or- der to establish a claim in constructive dis- missal: 1. Has there been a breach to the employ- ment contract, and if so, did the breach substantially alter an essential term of the contract? 2. Would a reasonable person in the same situation as the employee consider that the essential term of the employment contract be substantially altered? If an employee were to allege constructive dismissal on the basis of a minor change in vacation entitlement, it is unlikely that the employee would be able to satisfy either stage of the above test. Since vacation is a small portion of an employee's total remu- neration and benefi ts, it is unlikely that a change to vacation entitlement would, on its own, amount to a "substantial alteration" of his or her terms and conditions of employ- ment. What amounts to a "substantial altera- tion" is a fact driven exercise, but generally courts have found that a compensation re- duction of less than 10 per cent of the total remuneration package does not amount to a constructive dismissal claim, whereas a compensation reduction of more than 20 per cent of the total remuneration package does. For example, in Hamilton & Olsen Surveys Ltd. v. Otto, the employer, during an eco- nomic downturn, unilaterally changed two employees' vacation entitlement from six weeks to four and suspended its matching RRSP savings plan. e ultimate eff ect was to reduce the employees' annual compensa- tion by 6.5 and eight per cent, respectively, but keep the employees' annual salary in- tact. e Alberta Court of Appeal found that these were relatively minor changes and did not indicate that the employer did not oth- erwise intend to be bound by the terms of the employment contract. As such, the em- ployee's claim for constructive dismissal was dismissed. However, if a change to vacation entitlement is coupled with other changes in remuneration or employment responsi- bilities and duties, the net changes may col- lectively establish a constructive dismissal: see Zitten v. Sadie Moranis Realty Corp.; Benoit v. Canadian Corps of Commission- aires (Southern Alberta); Borasto v. Atwater Insurance Agency Ltd. Employers may avoid the risk of a con- structive dismissal claim in instances such as amending a vacation policy, by giving employees some notice of the pending changes. For policy changes that result in a minor eff ect to an employee's total remuneration package, only a minimal amount of notice is required. However, to determine the appropriate notice period, both the existing vacation policy and the employee's employment contracts would need to be reviewed as a preliminary step to determine if a notice period is specifi ed. Finally, with company-wide policy changes that have a minimal eff ect on the working force, there is no issue in making a 'group' announcement, so long as aff ected employ- ees are provided with a company contact that can answer questions if an employee has a concern. For more information see: • Potter v. New Brunswick (Legal Aid Ser- vices Commission), 2015 CarswellNB 87 (S.C.C.). • Hamilton & Olsen Surveys Ltd. v. Otto, 1993 CarswellAlta 108 (Alta. C.A.). • Zitten v. Sadie Moranis Realty Corp., 2015 CarswellOnt 19639 (Ont. S.C.J.). • Benoit v. Canadian Corps of Commission- aires (Southern Alberta), 2011 Carswel- lAlta 2402 (Alta. Prov. Ct.). • Borsato v. Atwater Insurance Agency Ltd., 2008 CarswellBC 1144 (B.C. S.C.). Changing vacation entitlement Question: If a company implements a change in how additional vacation time is earned, does it need to formally notify the employees it immediately affects or can it make a general announcement to everyone? Are there any legal considerations for such a change? What to do with an accused harasser Question: What are the legally safe alternatives to placing an accused harasser on paid leave while a complaint is being investigated? Should the individual be in the workplace at all? Answer: Employers are responsible for dealing eff ectively, quickly, and fairly with claims involving workplace harassment. It is prudent for every employer to implement workplace policies and procedures for mak- ing inquiries into allegations of workplace harassment since these types of investiga- tions are often scrutinized by the courts. One common procedure for employers is to remove the accused harasser from the workplace during an investigation in order to mitigate any escalation or further compli- cations. An employer's power to remove the ac- cused harasser from the workplace stems from the Supreme Court of Canada deci- sion Cabiakman c. Industrielle Alliance, cie d'assurance sur la vie. In this case, the court affi rmed that it is an integral part of any em- ployment contract to suspend employees for administrative reasons because of acts of which the employee has been accused. is power, however, is limited and must be exercised in accordance with the following requirements: • e action taken must be necessary to pro- tect legitimate business interests. • e employer must be guided by good faith and the duty to act fairly in deciding to impose an administrative suspension. • e temporary interruption of the em- ployee's performance of the work must be imposed for a relatively short period that is or can be fi xed, or else it would be little dif- ferent from a resignation or dismissal pure and simple. • e suspension must, other than in ex- ceptional circumstances that do not apply here, be with pay. If an employer opts not to place an accused harasser on administrative leave and instead allows the accused harasser to continue to work at the workplace, the employer runs the risk of complicating the investigation. e complainant and witnesses required for the investigation may not feel that they can be forthright in their interviews when the ac- cused harasser is just down the hall. Further, there may be a perception that the employer SEPARATION NEEDED on page 11 » with Tim Mitchell Ask an Expert NORTON ROSE FULBRIGHT CALGARY

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