In a recent decision, the Ontario Superior Court of Justice found an employer didn’t constructively dismiss a long-service employee when it provided her with 18 months of working notice prior to asking her to enter into a new employment contract that included changes to vacation pay and a signing bonus.

In Lancia v. Park Dentistry, Michele Lancia worked as a dental hygienist for Park Dentistry Professional Corp. and its predecessor from 1997 to 2016. A new owner took over in 2008. In 2014, after consulting with his legal counsel, the new owner told employees he’d be requiring them to sign a new written employment contract. It contained new terms and conditions, including changes to vacation pay.

The previous owner had been paying employees vacation pay before they earned it, calculating it on the assumption that staff would work 40 hours a week throughout the year. Lancia had been receiving such a benefit: her vacation pay amounted to 10.4 per cent of her earnings, calculated on an assumed 40-hour week.  She received that amount despite the fact that she worked significantly fewer than 40 hours per week in the years at issue.

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The employment contract also contained a termination clause that stated the employer could terminate Lancia at any time by providing her with the minimum entitlements to notice and severance under the Employment Standards Act.

The company provided Lancia with the new employment offer in August 2014. The offer stated that it was terminating her employment in February 2016 and that the 18 months running from the date of the offer to that time would count as the working-notice period. At the end of that period, she could choose to either sign a new employment contract or her employment would end in February 2016. The company would provide a $2,000 signing bonus if she signed the new contract by September 2014.

Two days after she received the new contract, Lancia signed it without raising any objections. She continued to work for the dental office throughout the working notice period but then resigned on Feb. 9, 2016, claiming constructive dismissal due to a material change in the employment relationship amounting to repeated improper reductions of vacation pay, as well as allegations of sexual harassment.

The court noted that a constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice to the employee. Such a unilateral change, without the employee’s consent, can amount to a repudiation of the contract of employment by the employer, whether or not it intended to continue the employment relationship. The court further noted that where a constructive dismissal has occurred, the employee can treat the contract as wrongfully terminated and resign. That, in turn, gives rise to an obligation on the employer’s part to provide damages in lieu of reasonable notice.

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The court stated that the test for constructive dismissal is “an objective one, considered from the perspective of a reasonable person in the same situation as the employee.” It found that Lancia received valid consideration for signing the new employment contract in the form of the signing bonus.

It held the company had terminated Lancia’s former employment with valid notice and that it’s well-settled law that an employer can transition someone to a new contract without providing consideration by providing the employee with reasonable notice of the change to the employment relationship. If Lancia didn’t want to accept the changes to her employment, she could have used the 18 months’ working notice period to seek new employment. She was under no obligation to sign the contract two days after receiving it, nor was she under an obligation to work for 17 additional months before resigning.

With respect to the Lancia’s claim of sexual harassment, the court found that she’d taken innocent comments made by her employer and manipulated them to fit her claim.

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In the end, the court rejected the claim for constructive dismissal and ordered summary judgment in the employer’s favour.

The case confirms that an employer can change the terms and conditions of employment for existing employees, without constructively dismissing them, as long as it gives reasonable notice of the change or provides valid consideration in exchange for a worker’s agreement to the new terms and conditions of employment.  

Thomas Agnew is an employment and labour lawyer at Hicks Morley, advising public and private sector employers on a wide range of human resources issues. These are the views of the author and not necessarily those of Benefits Canada.
Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com

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