Unilateral reductions in compensation: Court of Appeal of Alberta provides guidance on time limits for ‎employees to claim constructive dismissal ‎

A recent Alberta Court of Appeal decision, Kosteckyj v Paramount Resources Ltd, 2022 ABCA 230, reaffirms that an employee must decide within a reasonable time period to object to a unilateral reduction in compensation by their employer in order to advance a successful constructive dismissal claim.

On March 27, 2020, the employer announced a cost reduction program to be made effective April 1, 2020, which resulted in the employee receiving a ten percent reduction in base salary, suspension of RRSP contributions, delay or cancellation of the employee’s bonus, and no further access to seminars or training. The employee was a professional engineer.

On April 22, 2020, or 25 days after the cost reduction program was announced, the employer terminated ‎the employee on a without cause basis. The employee subsequently brought an action alleging she had ‎been constructively dismissed on April 1, 2020 when the cost reduction program took effect. ‎

Alberta Court of Appeal decision

The Court of Appeal found the employer had unilaterally changed the employee’s contract to her detriment by reducing core elements of her compensation. However, the Court found the trial judge had made one reversible error in finding that the employee ‎refused to accept the changes, based on the fact that the employee had continued to work after learning ‎of the changes up until the date of her termination.‎

While the Court was unanimous in its holding, there was disagreement on the issue of what constitutes a ‎reasonable ‎timeline for an employee to make a decision whether to accept or reject new terms of ‎employment. ‎Wakeling J.A. stated that 10 business days was reasonable in the immediate case, and that ‎it would be ‎rare for a reasonable timeline to extend beyond 15 business days. Pentelechuk J.A. and Ho ‎J.A. ‎preferred to avoid stating a specific time period, but clarified that 25 days was a sufficient time ‎period ‎for the employee to decide whether to accept or decline the changes to her employment contract ‎based ‎on the unique circumstances of the appeal.‎ ‎

Takeaway for employers

This decision provides guidance on what is considered to be a reasonable timeline for an employee to decide whether to accept or object to a reduction in compensation in the context of a constructive dismissal claim. It’s important to bear in mind that unilateral changes to other terms and conditions of employment may afford employees more time to determine whether they wish to accept or object to such changes.

To avoid uncertainty, employers may wish to first obtain an employee’s consent in writing before implementing changes to terms and conditions of their employment. Where obtaining consent is not practicable, this decision demonstrates that an employee’s silence (or failure to advance evidence of an objection) may lead to a finding of acquiescence based on the employee continuing to carry out work duties in the normal course.

For further information please, contact any of the members of the DLA Piper Canadian Employment and Labour Law Service Group listed here.