Canadian Employment Law Today

December 6, 2017

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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Canadian HR Reporter, a Thomson Reuters business 2017 Answer: e answer is yes, an employer can provide for changes in an employee's posi- tion in the employment agreement. e challenge, of course, is accurately anticipat- ing and stipulating the changes in advance so they are covered by the agreement. Following the 2015 Supreme Court of Canada decision in Potter v. New Bruns- wick Legal Aid Services Commission, constructive dismissal most commonly re- sults from a unilateral change by the employ- er that substantially alters an essential term of the contract. Alternatively, it can result from a course of conduct by the employer that, taken together, demonstrates that the employer no longer intends to be bound by the employment contract. However, if the employer and employee agreed that the em- ployer has the ability to change specific as- pects of the employment relationship, and those contemplated changes are reflected in the employment contract, then that change is not a unilateral act by the employer and therefore not constructive dismissal. In Pot- ter, the court said: "If an express or an implied term gives the employer the authority to make the change … the change is not a unilateral act and therefore will not constitute a breach. If so, it does not amount to constructive dismissal." Having said that, terms of this nature need to be crafted with care. Courts expect that any agreed-upon future change would not be so broad as to be meaningless. Vaguely permitting an employer to change terms and conditions "according to the employer's needs" would likely fall into that category. erefore, it would be helpful to outline pos- sible changes in the agreement, as suggested in the question. It would similarly be help- ful to outline possible changes in a policy, assuming that policy was incorporated into the contract. If not, any such change would likely be unilateral, although the policy could still be helpful in the determination of whether the change was so substantial as to constitute constructive dismissal. We know that changes to the employ- ment relationship which attract claims of constructive dismissal include changes to an employee's job title and responsibilities, reporting relationships, and compensation structure. If those potential changes are con- templated by the employer in advance, they could be specified in the employment agree- ment as examples of acceptable changes that would not be considered constructive dis- missal. Ultimately, a court would scrutinize the intent of the parties at the time the agree- ment was entered into. For example, even if the employment agreement generally stated that the employer may make changes to the compensation structure from time to time, there is a risk that a court may find that while a certain degree of change was contem- plated, at a certain point an actual change to compensation would be so substantial that it cannot be said to have been contemplated and agreed to by the parties. A change that resulted in the reduction of an employee's six-figure compensation to an amount near minimum wage is an extreme but obvious example. e more clear and specific the term pro- viding for changes to the employment rela- tionship, the more likely an employer can rely upon it to fend off an allegation of con- structive dismissal. For more information see: • Potter v. New Brunswick (Legal Aid Services Commission), 2015 CarswellNB 87 (S.C.C.). Probationary periods for fixed-term contracts Question: Can there be a probationary period for a fixed-term contract? If so, is there a minimum length the contract should be to justify a probationary period? Answer: Yes, there can be a probationary pe- riod for a fixed-term contract, and no, there is no minimum contractual length. We know that employers encounter dif- ficulties at times when they enter into a fixed-term contract and later do not have just cause to bring the employment rela- tionship to the end. Unless the parties have agreed otherwise, if the employer terminates a fixed-term contract, it will be liable for the employee's compensation and benefits for the balance of the fixed term, and that liabil- ity will not be subject to mitigation by the employee. erefore, fixed-term contracts should include a term stipulating that the agreement ends at the earlier of: the expiry of the term, or the provision of a specified period of notice (or payment in lieu) by the employer prior to the end of the term. (How- ard v. Benson Group Inc.: "Of course, parties to a fixed term employment contract can specifically provide for early termination and, as in Bowes, specify a fixed term of no- tice or payment in lieu.") Similarly, probationary periods during a fixed-term contract can be helpful and are also legally acceptable. However, employers recognize that insisting upon a probationary period for someone hired after an extensive process may not be realistic. In any event, if a probationary period is agreed to and included in a fixed-term con- tract, there is no minimum length of contract required to justify a probationary period. Having said that, courts have subjected probationary periods to increased scrutiny. Courts will now require that any decision to terminate during the probationary period be based on a good faith assessment of compat- ibility. (Stacey Ball, Canadian Employment Law, citing Regan v. Chaleur Entrepreneur- ship Centre Inc.). e vigour with which this assessment is sometimes done, however, suggests an ex- pectation approaching "just cause" before the probationary employee can be summar- ily dismissed. Moreover, recent decisions suggest that, absent actual just cause, even a valid probationary period does not allow an employer to terminate employment during that period without notice if employment standards legislation stipulates an appli- cable, overlapping minimum notice period. In Ly v. Interior Health Authority (suggesting this without deciding it, as the terms were found not be incorporated into the employ- ment contract: "I would simply question, without deciding, the validity of employ- ment policies that attempt to circumvent the application of statutory entitlements in the ESA during the course of probationary periods." e B.C. Supreme Court accepted that this was an unsettled area of law. e employer in Ly argued that "suitability" was the basis for "just cause" in the probationary context, or alternatively, that probationary periods should be treated as fixed-term con- tracts. As a result, there is a growing movement away from traditional probationary ap- proaches with no compensation owing for both fixed-term and indefinite-term con- tracts. Stipulating in the employment con- SUITABILITY on page 6 » STUART McKELVEY HALIFAX Have a question for our experts? Email with Brian Johnston Ask an Expert Allowing for changes in employee's duties Question: Can an employer avoid the risk of constructive dismissal or the need for fresh consideration if an employment agreement states that the duties and nature of an employee's position can change according to the employer's needs? 2 | December 6, 2017

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