HR Professional - October/November 2008 - (Page 21)

L E GA L BY HENDRIK NIEUWLAND CHANGING EMPLOYMENT CONTRACTS the change. The recent Ontario Court of Appeal decision of Wronko vs. Western Inventory Service Ltd. has redeﬁned constructive dismissal by removing the employer’s ability to change an employment term by providing reasonable notice. In Wronko, the employee’s contract included a termination clause that provided two years’ severance. The company gave the employee two years’ notice that the clause would be changed to reduce his severance entitlement. Darrell Wronko continued working but disagreed with the change. Two years later, the company, Western Inventory Service, advised Wronko to accept the new term or “we do not have a job for you.” Wronko rejected the change and sued, claiming constructive dismissal. F or years, “constructive dismissal” was understood to occur when an employer changed a fundamental employment term without giving the employee reasonable notice of ‘‘ The Wronko decision represents a significant change to the law of constructive dismissal. At trial, the judge concluded Wronko was not constructively dismissed because the defendant gave the plaintiff reasonable notice of the change. The appeals court sided with the employee, ﬁnding that an employer cannot change a fundamental term of employment by providing advance notice. The court set out three options when an employer changes an employment term: 1. The employee may accept the change; 2. The employee may reject the change and sue; or 3. The employee may communicate they are rejecting the change. The employer can then terminate the employee (with reasonable notice) and offer re-employment on the new terms. However, if the employer does w w w. HRT houghtLeader. c om ’’ not terminate and the employee continues working under the original terms, the employer will be presumed to have accepted the employee’s rejection of the change. Since Wronko told his employer he rejected the change, and continued working for two years, the court found the employer had implicitly agreed to not change the termination clause. The court also held that Wronko was ﬁred when his employer changed the clause and was therefore entitled to two years severance. The Wronko decision signiﬁcantly increases liability when an employer seeks to change employment terms. How can you limit this risk? 1. Provide consideration for the change. Changes to an employment contract can be legally made where the employee is given something in return (e.g., a signing bonus). 2. Provide “working notice” along with an offer of re-employment under the new terms. Terminate the employee by providing “working notice” while at the same time offering reemployment under the new terms starting at the end of the working notice period. Immediately offering re-employment under the new terms should soften the blow to morale caused by the notice of termination. And if the employee rejects the offer of re-employment, you will have time to ﬁnd a replacement employee at the end of the working notice period. The Wronko decision represents a signiﬁcant change to the law of constructive dismissal. Employers now need to be very careful when making material changes to employment contracts. Until this case is overturned or varied, employers will not be successful in altering the terms of an employment contract by simply providing reasonable notice of the change. Hendrik Nieuwland practises employment law with Shields O’Donnell MacKillop LLP of Toronto. O c t o b e r / N o v e m b e r 2 0 0 8 21 http://www.HRThoughtLeader.com

Table of Contents Feed for the Digital Edition of HR Professional - October/November 2008

HR Professional - October/November 2008 Contents Editor's Letter Contributors Leadership Matters Upfront Legal Compensation Human Capital Talent Management Murphy’s Law Wise Counsel On Message HR 101 Interview with Joseph McCool Off the Shelf The Last Word

HR Professional - October/November 2008

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