It depends. A unilateral change to a fundamental term or condition of employment triggers the risk of a constructive dismissal claim. This is because any substantial decrease in hours resulting in a significant decrease in remuneration will likely constitute a repudiation of the employment contract, which would allow the employee to choose to resign and pursue the employer for damages resulting from the termination. However, a reduction that falls short of a substantial change, viewed from the position of a reasonable person in the same situation as the employee, may not amount to constructive dismissal. Moreover, the number of days per week, the percentage of the wage reduction, and the period over which this occurs have an impact on whether the change is so significant that it constitutes constructive dismissal.
The courts recognize that employees consider compensation to be one of the most critical terms of an employment contract. Consequently, reductions in compensation or changing the structure of compensation by changing the employee’s work hours for example, will be considered as involving an essential term of the employment contract. The courts have determined that straight reductions in compensation in the range of 10 to 20 percent constitute constructive dismissal.
In addition, an employer has the right to manage its business and operations including scheduling barring any minimum standard provisions found in employment/labour standards legislation. In some cases, employers might have the right to determine schedules and to reduce or increase hours accordingly, through contract, policy or past practice. Where the employer doesn’t have such a right, whether doing so amounts to a constructive dismissal depends on how much the change impacts the employee’s income.
When an employer requires an employee to reduce hours of work or compensation or both, the employment contract must allow for it. If not, the employer will have to negotiate a change to the contract with the employee. This will require notifying employees of the request to reduce hours and/or pay.
The employer will need to ensure employees understand that the company is in trouble, though, they may be slashing hour and/or pay across the board, and the decision isn’t personal—it’s business. Pay cuts or reduced hours cannot be lowered based on a protected ground in human rights legislation. For example, if the company is struggling, the employer cannot legally cut the rates of all female employees to improve cash flow.
If an employee is willing to agree to a reduced workweek or reduced compensation, there may not be a constructive dismissal claim. Employers must get the employee’s agreement in writing and provide adequate consideration – such as a bonus when things turn around or extra weeks of vacation or other benefits – to ensure enforceability of the changed term. Without any fresh consideration, the agreement to reduce an employee’s entitlements could be void. Employers should seek specific legal advice before making any changes of this nature.
Special scheduling and hours of work measures in place during COVID-19 by jurisdiction
Alberta has implemented changes to scheduling and shift change notices to allow employers to appropriately respond to public health measures.
On April, 6, 2020, the 24-hour written notice requirement for changes to schedules in the Alberta Employment Standards Code does not apply during a pandemic. Employers have had to respond to many scheduling challenges in the face of COVID-19 for various reasons, such as: staggering workforces for the purposes of physical distancing; responding to fluctuations in work demands; and responding to workforce fluctuations as employees are unable to attend work on short notice. The two-week written notice for temporary changes to averaging agreements will not apply. This change is effective as of the date of the Ministerial Order, which is immediate as of April 6, 2020.
In addition, provisions on variances have been revised to make them easier to obtain. Variances are permits that allow relaxation of certain employment standards for individual workplaces. They are used where a need can be demonstrated in a given workplace. COVID-19 has resulted in many unique situations that require adjustments to the normal standards that would apply, and making it easier to obtain variances is part of an effort to remove red tape so that employers can respond to the current crisis in a timely way. The other changes are effective as of the date of the Ministerial Order. This change is effective as of the date of the Ministerial Order, which is immediate.