How long is too long to resign in response to constructive dismissal?

A constructive dismissal can arise if an employer unilaterally changes a term or condition of an employee's employment, for example, by significantly reducing the employee's responsibilities or compensation. Where such a change occurs, the employee has a choice to make - continue to work or treat the employment relationship as at an end and sue for constructive dismissal. If the employee continues to work following the change, they may be prevented from later relying on the change to claim constructive dismissal.

However, choosing whether to continue to work or to sue for constructive dismissal can be a big decision, especially given the fundamental role employment plays in many employees' lives. Employees are therefore permitted a reasonable period following the change to decide whether to treat it as a constructive dismissal.

But how long is "reasonable"? How long can an employee continue to work following a unilateral change to employment before being found to have acquiesced to the change?

These questions were recently considered by the Ontario Labour Relations Board in ALL Canada Crane Rental Corp. v. Jason Hanna, 2021 CanLII 74765 (ON LRB). In this case, the Board determined that a nearly five-month delay in resigning following constructive dismissal was not reasonable.

Facts:

Two former employees of ALL Canada Crane Rental Corp. ("ALL Canada") brought claims for termination pay and severance pay based on the alleged constructive dismissal of their employment.

On August 7, 2018, ALL Canada changed its working relationship with both employees. Both employees were effectively demoted - their titles were changed, and key duties and responsibilities were removed. Their salaries remained unchanged.

The employees continued to work for ALL Canada following the changes.

On November 28, 2018, both employees delivered letters to ALL Canada stating they were treating their demotions as constructive dismissal of their employment, but they were continuing to work at ALL Canada to mitigate any losses. Both employees subsequently resigned and ceased working for ALL Canada between December 2018 and January 2019.

Analysis:

The Board concluded that the unilateral reductions in the employees' respective duties and responsibilities did amount to constructive dismissal of the employees' employment.

However, the Board then considered whether the employees had resigned in response to the constructive dismissal "within a reasonable period", as required. Relying on well-established common-law principles, the Board stated that it must keep in mind the situation and personal circumstances the employees faced when the unilateral changes occurred.

Taking account of the employees' length of service (16 years and 30 years) and family ties to the business, the Board nevertheless concluded the nearly 5-month delay between the date of the demotions and the dates the employees' resigned was unreasonable. In reaching this conclusion, the Board noted that there were no unique personal factors or extraordinary circumstances that warranted extending the time to resign beyond the typical 3-4 month window normally found to be reasonable by the courts.

Outcome:

As the employees failed to resign within in a reasonable period of time following their constructive dismissals, they were not able to rely on it to claim termination entitlements. They were not entitled to termination pay or severance pay.

Takeaways:

This decision serves as a good reminder of the importance to tread carefully when dealing with changes in working relationships.

Demoting an employee or otherwise unilaterally changing the terms and conditions of an employee's employment gives rise to risk of a constructive dismissal claim, even if the employee suffers no loss in compensation. Employers contemplating changes to their workplace structures are encouraged to plan ahead and seek legal advice on how to mitigate the risks of such changes.

On the flipside, employees who face a reduction or change in their work responsibilities must act relatively quickly to indicate they do not accept the change. Unreasonably delaying the decision as to whether to accept the change or treat it as a breach may result in the employee being found to have acquiesced to the change and thus lost the ability to claim constructive dismissal.

In either case, speaking with an experienced employment lawyer before making important workplace decisions is encouraged. Lee Workplace Law would be happy to assist.