Jobs dismantled bit by bit can lead to a constructive dismissal claim

Keith had been vice president of a company that sold video gaming terminals in New Brunswick for 6 years when things started to change. Although Keith had been one of the original employees who helped increase sales over that period by 500%, and was earning $160,000 a year, suddenly his star started to fall.

First, in a company reorganization, his area of responsibility was reduced. Keith was concerned but  he was still responsible for working on major sales for a number of divisions of the company so he stuck in there.

A year and a half later, he was told not to attend an important  planning meeting to which he would usually have been invited. Soon thereafter, his boss’s assistant told him, on behalf of his boss, that he no longer had authority to sign any documents on behalf of the company. Keith left and sued.

Keith claimed that he was constructively dismissed and that taking away his signing authority and excluding him from an important meeting, given the changes that had happened a year and a half before, were the straws that broke the camel’s back. Although his title was still the same, he had been effectively demoted without his consent and without reasonable notice.

A constructive dismissal takes place when there is a significant change to the terms of employment without reasonable advanced notice. That  notice is determined by an employee’s age, level of responsibility and seniority.

In court, the company took the position that Keith could not rely on the loss of authority he experienced a year and a half before he left because he had stuck around and accepted those changes. It said Keith quit for no good reason and it owed him nothing.

Fortunately for Keith, the judge did not agree with his former employer.

What Keith experienced was demotion by increments. The employer takes away this and then takes away that. Each change in itself is not dramatic and they are spaced out by months. The employer hopes that as the employee accepts each new reduction in authority that they will get away with the next one.

The courts have long recognized that there can be a straw that breaks the camel’s back. The demotion does not have to happen all in one day. Judges are not disposed to hold it against an employee if they accept some changes in hope that things will improve or at least not get worse. So long as there is some significant final event which triggers the employee’s departure, the courts can and do find that a constructive dismissal has occurred as a result of the cumulative effect of the changes.

Keith was awarded 6 months pay in lieu of notice and the commissions he would have received during that 6 months from a big sale he had made some time before he left. The commissions on the sale were paid by the client over time and Keith had been told that he would receive his commission as the payments came in as long as he did not “leave the company for any reason”.

The employer argued that since Keith had left the company he was not entitled to those commission payments.

But the legal ideal is working notice. If the employer had said to Keith, “6 months from now we are reducing your responsibilities, excluding you from meetings and taking away your signing authority”, there would have been nothing that Keith could do about it.

The court was not prepared to let the employer benefit from the fact that it did not give Keith working notice. If it had, clearly he would have received the commissions.

The reality is that this “demotion by increments” often works for employers. A constructive dismissal is not as easy to prove in a courtroom when it comes in bits and pieces rather than one dramatic change.

Employees experiencing a demotion by increments should document each change, object professionally and respectfully in writing as each occurs and consult an employment lawyer before they make their exit.
 

Of course, winning in court probably did not fully heal Keith. Employees who are slowly but progressively marginalized and devalued usually experience humiliation and a loss of self worth.  Going to work each day waiting for the next shoe to drop can be a demoralizing experience. Putting the legalities aside, the best defense is to aggressively seek out a new employer that will value both your contributions and your worth as a person.

As published in The Hamilton Spectator, August 18, 2007. Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees.