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Changing Key Terms of Employment: Don’t Do It Unilaterally!

By February 13, 2018August 17th, 2020Employment Law

Employment Lawyers and Employers in Ontario recently received some guidance on how to manage their team and make changes to employment contracts – and this time, it was from the Ontario Court of Appeal.

The Case

In Nufrio v. Allstate Insurance Company of Canada,  the employer gave the employee working notice in July 2007 that there would be significant changes to his employment – but those changes wouldn’t come into effect for another 26 months.  The employer didn’t ask the employee to sign a new contract, or to have to contract start early, or gave anything extra to the employee.  It was simply a warning that there were some big changes coming to the terms of his employment.

The employee was fine with this.  The employee even told the employer that he intended to retire after that 2-year period.  All was good.

But, about 15 months into the working notice period, the employer did something it shouldn’t have: it told the employee it was making another significant change to his employment.  Allstate told the employee that his neighbourhood office was closing and he was required to move to a new office (further away) in less than one month and work under a new business model.

The employee refused and wanted to keep working under the old agreement (that was about to change in less than a year).  This refusal led the employer to terminate his employment on November 6, 2008.

The Ontario Court of Appeal confirmed the employer was in the wrong here! The Court reviewed all of the facts, as well as a lower court ruling (which was won by the employer!!) and overturned the previous decision and ruled in favour of the employee.

The Court of Appeal held that the employee was fully entitled to continue working under the old employment agreement and under the working notice he received in July 2007.  The Court made a specific note (in its rather short decision) that the working notice agreement stopped the employer from unilaterally making the changes it wanted to make during that 26-month working notice period.

(What wasn’t really discussed in this case was whether this was a constructive dismissal or not. That was because the employee’s lawyer didn’t argue that it was.  So, the Court didn’t go into that issue in any detail.  But if you ask me, closing an employee’s workplace is a pretty clear case of constructive dismissal.)

The Result

What was the result? Well of course, the employer had to pay.  Not only did the employer have to pay out the rest of the working notice period (about 10 months of full pay and benefits which was $200,000.00), and the employer had to pay almost $70,000.00 of the employee’s legal fees.

Why Did This Happen!

This all could have been avoided – with the proper advice!

It sounded like the employer got good advice in July 2007 when it gave its employee plenty of notice of a significant and unilateral change to its employment.

But it also sounds like the employer acted too hastily when it wanted to close the office 15 months later.

Maybe there were more significant reasons for closing that office? Or maybe the employer forgot about the specific promise it had made to the employee that it would not make any unilateral/significant changes during those 26 months of working notice. Or maybe the employer forgot about the Employment Standards Act (at section 60) which legally stops the employer from doing exactly what it did.

In any event, this case serves as a reminder for dentists on what do to and what not to do:

DO

  • treat employees fairly
  • give reasonable notice of any significant unilateral change to employment terms
  • get legal advice before you make any HR changes

DON’T

  • break your promises with your team members (especially the written ones)… cause it’ll cost you big time
  • force an employee to sign a contract or any other document
  • make hasty decisions if you don’t have to
DMC