Employees must decide quickly if they want to pursue constructive dismissal

By Howard Levitt

One of the big risks for employees in constructive dismissal cases is waiting too long

One of the big risks for employees in constructive dismissal cases is waiting too long rather than quickly protesting, at the very least, and often, resigning and suing. The reason is that, if an employee does not protest and take action reasonably quickly, they will have acquiesced to the change in working conditions or, as it is called in constructive dismissal law, condoned the change.

But the question always is: How long can an employee wait before they will have condoned the change and be unable to take legal action? There have been very few cases on point but a recent case of the Alberta Court of Appeal determined it to be a very short period of time.

Olga Kosteckyj worked for Paramount Resources as a senior engineer for seven years. In response to COVID, Paramount implemented cost reductions which included reducing Kosteckyj’s salary and suspending certain benefits on April 1, 2020. The employer then terminated several employees, including Kosteckyj, 21 days later.

The trial judge found that Kosteckyj had been constructively dismissed on April 1 and awarded her damages from that date based on her salary before the reduction. Paramount successfully appealed.

The Alberta Court of Appeal found that, by waiting for a reasonable period without objection and not resigning or suing, Kosteckyj accepted the reduced salary and benefits and condoned the constructive dismissal. As one of the Judges put it:

“The fact that she continued to work in the same office discharging the same tasks as she did before April 1, 2020 for three weeks is indisputable evidence that she had accepted the new terms of employment. This is not a case where the employer directs an employee to undertake different tasks or relocate to undertake different or the same tasks,” the judge wrote.

“I am satisfied that no more than ten business days after April 1, 2020 constituted a reasonable period of time for Ms. Kosteckyj, a professional engineer and a healthy, knowledgeable and informed person, to collect the information she needed to assess the state of the employment market for professional engineers in Calgary and elsewhere, 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 term.”

That judge found that it should not have taken any employee more than 15 business days to make a decision.

The remaining judges on the panel found that there was no “bright-line” test for the number of days applicable in all cases.

The consequence of Kosteckyj’s condonation was that, when fired 21 days later, she was dismissed only as of that later date and her damages were based on the new, lower salary and benefits which she had accepted through condonation.

What if the changes were not as clear cut as a reduced salary but changes, for example, to a new position or location? In that case, the court might permit the employee more time (than the 10 or 15 days) to try out the new position before making a decision as to whether to accept the constructive dismissal. The court in this case said that if the employee in question had been less sophisticated than Kosteckyj, who was an engineer, more time (i.e.: 15 days) would have been permitted for her to decide.

Some employers seek the consent of employees before taking actions which would constitute a constructive dismissal. Of course, if consent is obtained, the employee cannot later complain. But it is practically ill-advised. After all, what employee would be so foolish as to agree to a demotion or salary reduction if asked? Look what happened at the outset of COVID. Millions of Canadians, without being asked, were placed on layoffs or given salary reductions or reduced hours of work, all of which would have been constructive dismissals. Very, very few disagreed or took action and, as a result of the law of condonation, it quickly became too late for them to do so. I suspect that if those same employees had been asked, millions would have declined and either the employer would have not proceeded with what was economically necessary at the time or many of the employees, who had refused their consent, would indeed have sued.

There is also the issue of whether, while protesting, an employee must or should resign and claim constructive dismissal. That is the major conundrum employees have. If they resign and sue and it is found either that they were not constructively dismissed or that they were but should have kept working to mitigate while seeking other employment, they will recover nothing at all from the lawsuit. The test of constructive dismissal is a major change in terms of employment that no reasonable person should have to put up with. However, even if there is a constructive dismissal, the courts generally require employees to remain working while looking for other work unless there is either a reduction in remuneration or continuing employment is objectively humiliating or otherwise unreasonable in the circumstances.