Changing Employment Agreements Without Risking Constructive Dismissal Claims
Late last year, the Ontario Superior Court of Justice in Hagholm v. Coreio Inc., 2017 ONSC 7713, made a decision that addressed the issue of an employer’s unilateral amendment of an existing employment contract and whether such amendments can result in the constructive dismissal of a long-term employee.
The plaintiff, in this case, started working for the defendant’s predecessor company in April 1982. Ten years later the plaintiff tendered her resignation due to the lengthy commute but in response, the employer offered the plaintiff the opportunity to work from home 3 days per week.The plaintiff accepted this full-time offer on the basis that she could work 3 days per week from home and her employment continued without interruption for the next 22 years.
Changing Employment Agreements
At the end of 2015, the defendant purchased the plaintiff’s employer company and within 2 months the defendant advised the plaintiff that she would no longer be permitted to work from home and was required to work in the office 5 days a week.
The plaintiff took the position that the unilateral amendment to her employment contract constituted a constructive dismissal and she resigned from her position and commenced legal action for reasonable notice for her 22 uninterrupted years of service with the defendant and its predecessor.
The court held that:
by far the biggest factor to consider in deciding whether or not the plaintiff was constructively dismissed, is the fact that after 22 years of being allowed to work three days out of five at her home in the Waterloo Region, and two days at the defendant’s office in Vaughan, Ontario, she was ordered to work only from the defendant’s office.
While the defendant submitted that there was nothing in the plaintiff’s employment agreement or in the defendant’s corporate records that permitted or agreed to allow the plaintiff to work from home and accordingly attempted to characterize the arrangement as a “preference” rather than a binding contractual term. The court disagreed and held that even without a written agreement, the oral assurances of the employer to the employee to permit her to work from home constituted a fundamental aspect of the employment agreement between the parties. Furthermore, this agreement between the parties continued without interruption for a period of 22 years.
Essential Terms of Employment Agreements
The court ultimately concluded:
 On the evidence before me, I find that the plaintiff’s ability to perform her work from her home office 60% of the time was an essential term of her employment agreement with the defendant. There is no doubt on the evidence before me that the defendant unilaterally breached this term of the agreement, thereby constructively dismissing her.
In its calculation of damages that the plaintiff was entitled to for wrongful termination, the court primarily considered the plaintiff’s length of employment with the defendant, namely 22 years and awarded one month per year for reasonable notice.
Amending Employment Agreements
This case demonstrates that an employment agreement cannot easily be amended by an employer, particularly in circumstances related to long-term employees. While an employer is entitled to amend an employment agreement as the nature of their business changes, significant unilateral changes to the employment agreement can attract a claim for constructive dismissal.
As such, employers should be diligent in ensuring that when making fundamental changes to the employment agreement that sufficient and reasonable notice of the change is provided to the employee. What notice is sufficient and reasonable is determined on a case-by-case basis, but this case demonstrates that failure to provide sufficient and reasonable notice can result in a claim for constructive dismissal.
It is vitally important for employers to ensure that they are compliant with legislative and common law regimes to avoid potential claims from employees for constructive dismissal.
If you have further questions about employment law, contact us today.