“Temporary” Pay Cut of $7 = Constructive Dismissal

In Idris v Grand West Electric Ltd., 2024 ABCJ (Unreported, Sept 3, 2024)(McCorquodale), a Site Supervisor with 8.5 years of service with a temporary pay cut from $45 to $38 per hour was considered constructively dismissed and was awarded 9 months’ severance.

This case is important because there were quite a few contested employment law issues, including timing of constructive dismissal, job abandonment, and mitigation of damages principles.

This case is unreported, and was provided to Bow River Law for summary by Lluc Cerda, counsel for the plaintiff.  If you are a human resources or legal professional who needs a copy, please email me at jfairbrother@bowriverlaw.com.

Facts

The following were some of the pertinent facts summarized by the Alberta Court of Justice:

• The plaintiff employee is a ticketed electrician, who worked as Site Supervisor for the defendant employer Grand West Electric for 8.5 years
• The employee earned $45/ hour for hours worked
• The employer is a full service electrical contractor, and the work is project based
• Site Supervisors made $45/ hour, whereas regular Journeyman electricians made $39.50 / hour
• On April 1, 2021, Grand West Electric sent an email to its employees indicating that there would only ever be one Site Supervisor per site, and Journeymen rates were going down to $38/ hour. It also indicated that “foremen and site supervisors will temporary be adjusted in the same way”, effective July 1
• The plaintiff considered himself to be a “senior” site supervisor, and did not understand at the time of announcement that this would apply to him
• Before the change took effect, the plaintiff employee went on medical leave on June 4 for cancer surgery
• On June 10, Grand West Electric emailed all Site Supervisors indicating they all had to take online software training. The plaintiff was on leave at the time and did not complete it
• On May 13, 2022, the plaintiff advised the defendant that he was ready to return from his medical leave to work on May 30
• The defendant responded the same day that there were no Site Supervisor positions, so he’d be returning to work as a Journeyman
• The May 24, the plaintiff asked for clarification on what his wage rate would be, and the defendant responded that it would be $38/ hour
• On May 27, the plaintiff complained that this was a pay cut and demotion
• On June 1, the plaintiff notified the defendant that he was not returning to work. He then sued for constructive dismissal
• In June, 2022, the plaintiff set up his own electrical business, which took time to earn significant income.  He testified that he was also looking for work as a Site Supervisor by looking online daily, but did not find any that looked appropriate and didn’t submit any resumes

Analysis / Conclusion

Justice McCorquodale of the ABCJ identified 3 main issues categories: (1) was the plaintiff constructively dismissed? (2) If so, what was the period of reasonable notice? (3) Did the plaintiff fail to mitigate his damages?

Regarding constructive dismissal, the court applied the Potter test and found it found it was a constructive dismissal:

1. The reduction of $7 per hour was a contractual breach, and the demotion to Journeyman was evidence that the employer did not intend to be bound by the employment agreement
2. The employee did not agree to or condone the change
3. The employee declined the reduction in pay within a reasonable time, because he did not understand initially that it would have applied to him

The defendant argued that the pay cut was temporary and should not have constituted constructive dismissal.  The court found noted that it’s status as temporary was uncertain because it had been announced a year prior.

The defendant argued that the plaintiff had no intention of returning to work, as he failed to complete his online Site Supervisor training.  The court rejected this in part because the plaintiff was not required to do that training while on leave.

Regarding reasonable notice, the court found that this 53 year old Site Supervisor with 8.5 years of service with the defendant was entitled to 9 months’ of severance pay.

Regarding mitigation of damages, the court found that the plaintiff had not failed to mitigate his damages:

1. The defendant argued that the plaintiff’s failure to accept the Journeyman position was a failure to mitigate. The Court found rejected this because rejecting an offer of employment can only be a failure to mitigate if it occurs after the constructive dismissal, not before.  The court also noted that he would not have been obliged to take the lesser position anyway
2. The court found that there were not many comparable positions available in the job market for the plaintiff to apply for, and that his starting his own electrical business was not a failure to mitigate in the circumstances

My Take

This case is interesting to me, because although some of the employer’s defences were not strong, some of them had a real chance of succeeding.  As one example, if the court had found that the plaintiff understood the pay change announced in April of 2021 was going to apply to him, the defendant’s chances of succeeding on the constructive dismissal argument would have been considerably better.  I think both sides would still have a valid argument in that scenario, but it would have been much closer.

The facts in this case would not have made applying the law to them straightforward – but the messy nature of the facts is what makes this case interesting to me.

Finally, as noted earlier, this is an unreported decision.  If you are an employment lawyer with a relatively recent employment law decision that is not under a publication ban, please send it to me and I will probably summarize it – even if I don’t love what it says!

Bow River Law provides these regular legal blog articles for the purposes of legal news, education and research for the public and the legal profession.  These articles should be considered general information and not legal advice.  If you have a legal problem, you should speak to a lawyer directly.

Bow River Law is a team of knowledgeable, skilled and experienced employment lawyers handling employment law, human rights (discrimination) and labour law matters.  Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.