In Kosteckyj v Paramount Resources Ltd, 2022 ABCA 230 the Alberta Court of Appeal discusses (1) what a reasonable period of time is for an employee to make a decision of whether he or she will accept a reduction in compensation, and (2) the need to provide evidence of protest to avoid a finding of acquiescence by an employee.
This decision imposes fairly short timelines on employees to make a decision on whether they accept a change in compensation, and is important to the law of constructive dismissal in Alberta.
Facts
The following were the facts summarized by the Alberta Court of Appeal:
- On March 27, 2020, Paramount Resources (the “Employer”) implemented a cost reduction program effective April 1, 2020 wherein it introduced an across-the-board reduction to salaries and benefits.
- As a result, Ms. Kosteckyj (the “Employee”) received a 10% reduction in her base salary, the suspension of employer RRSP contributions of 6% of her base salary, a delay to or cancellation of her bonus and no further access to seminars or training.
- On April 22, 2020, the Employer proceeded to terminate the Employee on a without cause basis and provided her with 5 weeks of pay in lieu of notice which represented the statutory minimums of notice.
- On July 2020 the Employee commenced a wrongful dismissal claim, and in trial alleged she had been constructively dismissed on April 1, 2020.
- The summary trial judge concluded that the employer had constructively dismissed the Employee as the cost reduction program was a change to, and a breach of her employment agreement. The summary trial judge further held that the Employee had no obligation to decide whether this change was a repudiation of the contract in the 25 days between when she was informed of the cost reduction program and her termination.
- The Employer appealed, alleging that the summary trial judge misapplied the constructive dismissal test.
Analysis / Conclusion
The Alberta Court of Appeal confirmed that to establish constructive dismissal an employee must prove, from an objective perspective (a reasonable person in the employee’s situation) that (1) the employee’s employer failed to substantially discharge an essential obligation in the detriment of the employee, and (2) the employee (a) within a reasonable time (b) declines to accept the new terms of employment. An employer that treats an employee in a disrespectful manner and makes the employment relationship intolerable also constructively dismisses an employee.
The onus is on the employee to prove on a balance of probabilities the facts that establish the employer constructively dismissed the employee.
The Alberta Court of Appeal unanimously agreed that the Employee had established on an objective perspective that the Employer had made severe reductions to core aspects of the Employee’s compensation package. But the Alberta Court of Appeal disagreed with the summary trial judge’s finding that the Employee did not accept or acquiesce to the new terms of employment.
In particular, the Honorable Justice Wakeling, found that the Employee failed to prove that she had declined to accept within a reasonable time period the new terms of employment. Also, working for 3 weeks in the same office doing the same tasks was indisputable evidence that the Employee had accepted the new terms of employment.
Most importantly, Justice Wakeling reasoned that more than 10 days after April 1, 2020 constituted a reasonable period of time for a professional (an engineer) and a healthy, knowledgeable and informed person such as the Employee to collect the information that she needed to assess the state of the employment market in Calgary and elsewhere for her profession, to consult legal counsel to ascertain her rights and obligations as an employee, and to make an informed and prudent decision on the merits of rejecting or accepting the new employment terms.
Justice Wakeling further explained that short-service and long-service employees, assuming other important attributes are comparable, will be in the same position of accepting or rejecting new compensation level. Although an employee without the attributes of the Employee could potentially require additional time, it would be a rare case that a reasonable period would exceed 15 business days.
The Honourable Justice Pantelechuk and the Honourable Justice Ho, concurred with Justice Wakeling’s decision with the exception that they preferred to avoid stating a specific time period, particularly in the absence of argument and submissions on the issue. They found that in the unique circumstances of the appeal, including regard to the Employees years of service, that 25 days was a sufficient period of time for the Employee to decide whether she would accept the new terms or reject the new terms and claim constructive dismissal.
The Alberta Court of Appeal was unanimous in finding that given the contextual backdrop of the Covid 19 Pandemic, a decimated oil and gas industry, and poor labour market, the Employee’s decision to keep working for 25 days strongly suggested that she had acquiesced to the realities of her employment situation (that it is better to be employed than unemployed).
My Take
This is an important case for employees dealing with unilateral reductions in compensation, especially employees that may be considered sophisticated by the courts such as professionals, in that they may need to act quickly in obtaining legal counsel as to whether or not to claim constructive dismissal and to make that election without delay. Although Justice Pantelechuk and Justice Ho softened the reasonable time period set out by Justice Wakeling, it is imperative that any employee dealing with a unilateral reduction in pay take steps to communicate with his or her employer (preferably in writing) regarding the reduction in compensation and his or her dissatisfaction with the same. In my view, the lack of evidence by the Employee that she did not accept the reduction in pay or that she had not yet made up her mind (including reasons), ultimately led to the failure of her constructive dismissal claim. The Alberta Court of Appeal also made it abundantly clear that it was not dealing with other type of constructive dismissal claims and this decision was in relation to reductions in compensation only.
If your employer has reduced your compensation, you should seek legal advice without delay. Even with delay there are usually options, but the longer you wait the more difficult it will be to get a favorable outcome.
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