Alberta court clarifies timeframe for accepting job changes, constructive dismissal

Kosteckyj v. Paramount Resources Ltd

In this case, the Alberta Court of Appeal (ABCA) dealt with an appeal to a decision from the Alberta Court of Queen’s Bench (ABQB) in Kosteckyj v. Paramount Resources, which was decided by way of summary trial.

Olga Kosteckyj, a professional integrity engineer, suffered a 10 per cent reduction in salary imposed on April 1, 2020. Her employer, Paramount Resources Ltd. (Paramount Resources) also suspended contributions to her RRSP, and made potential changes to her bonus structure, as a result of company cost cutting measures.

The ABCA found that Paramount Resources did not constructively dismiss the engineer, but that she was in fact wrongfully dismissed. Her severance package was reduced from $107,247.97 to $97,190.56.

Facts

• Kosteckyj commenced employment with Apache Canada Ltd. as a Senior Integrity Engineer on October 15, 2013.
• In August 2017, Paramount Resources took over the business of Apache in Canada. Kosteckyj’s employment was continued. Paramount Resources continued to pay her base salary, but her benefits and bonuses were changed to align with the new owner’s programs.
• On March 27, 2020, Paramount Resources announced that, effective April 1, 2020, it would institute a company-wide “Cost Reduction Program” which would include a salary reduction of 10% for all employees, a suspension of the Company’s 6% RRSP Contribution Program, and a cancellation of the 2019 Bonus program.
• On April 1, 2020, as a result of the Cost Reduction Program, Kosteckyj’s base salary was reduced from $154,800 to $139,320. Paramount Resources’ contributions to her RRSp, based on 6% of her salary, was suspended, and her bonus status was unknown. Her access to seminars and training was curtailed.
• Kosteckyj took no steps to accept or reject the changes resulting from the implementation of the Cost Reduction Program. She did not resign in order to allege constructive dismissal.
• Kosteckyj, along with a number of other Paramount Resources employees, was fired without cause on April 22, 2020.
• Kosteckyj then sued Paramount Resources for wrongful dismissal.
• In the lower court decision, Justice Sidnell found that even though the plaintiff had not resigned, she was constructively dismissed as of April 1, 2020, when the employer breached the employment contract by making unilateral changes to her compensation.
• The court also concluded that the plaintiff’s failure to resign within the three weeks prior to her termination, was not a condonation of the changes in light of the current “turbulent economic conditions.”
• Kosteckyj was awarded $107,247.97 in severance pay.

Lower court’s decision

The main issues before the ABQB were:

• Constructive dismissal: Was Kosteckyj constructively dismissed?
• Severance pay: If Kosteckyj was constructively dismissed, how much severance pay should she receive?

One of the unique facts of this case was that Kosteckyj did not resign in order to allege constructive dismissal, but instead was expressly terminated by the employer approximately three weeks later. In the lower court decision, Justice Sidnell found that even though the plaintiff had not resigned, she was constructively dismissed as of April 1, 2020, when the employer breached the employment contract by making unilateral changes to her compensation.

The court also concluded that Kosteckyj’s failure to resign within the three weeks prior to her termination, was not a condonation of the changes in light of the current “turbulent economic conditions.” She was awarded $107,247.97 in damages (severance pay) for constructive dismissal. The defendant, Paramount Resources, then appealed the decision.

Appeal court’s decision

One of the main issues on appeal was the question of whether the ABQB trial judge erred in concluding that Kosteckyj was constructively dismissed on April 1, 2020, the date on which her salary was reduced and other compensation changes made without permission. More specifically, the ABCA considered whether her conduct in continuing to work during the three-week period leading up to her outright termination, meant that she had accepted the cut in pay.

Ultimately the court concluded that because Kosteckyj continued to work for three weeks following the changes, doing the same tasks at the same office, it was clear evidence that she had accepted the reduced level of compensation. The court held that the reasonable period for the plaintiff to make up her mind, as a “healthy, knowledgeable and informed person” was no more than 10 business days after April 1, 2020.

While Kosteckyj was not constructively dismissed, she was still wrongfully dismissed three weeks later and was entitled to damages. Accordingly, in overturning the trial judge’s decision that Paramount Resources had constructively dismissed the plaintiff as of April 1, 2020, the ABCA reduced the plaintiff’s severance award from $107,247.97 to $97,190.56.

Lesson for employees

• Don’t wait to raise concerns with your employer when it comes to job changes: This case is an important reminder to employees that failing to protest fundamental and unilateral changes to compensation in a timely manner, can greatly impact their ability to bring a constructive dismissal claim against their employer.
• Get your employment contract reviewed by a lawyer: If your employer has made significant changes to your employment contract, it is even more important to reach out to an experienced employment lawyer as soon as possible, to discuss your options, especially given the short timeframe in which to do so as clarified by the ABCA.

Lesson for employers

• Seek written consent: If you are making changes to your employee’s job, whether it be their hours or pay structure, by seeking written consent you can avoid a constructive dismissal. However, keep in mind your employees have a right to refuse these changes.