When Can an Employer Demote You with Legal Impunity?

Financial Post: June 04, 2013.  All Rights Reserved.

Employees who resign, claiming “constructive dismissal,” are effectively taking a leap of faith without a safety net. This usually arises from the common misconception that employers cannot deleteriously alter their terms of employment. When they are advised that they have been demoted, disciplined, moved to a branch office or had their pay frozen or reduced, they view it as a welcome invitation to resign and sue.

It comes as a surprise to many employers, employees and even non-specialist lawyers that the employer can do many of those things with legal impunity. Employers have wide discretion to manage their businesses, restructure their operations and make personnel changes which adversely affect employees as long as the change is not fundamental.

A recent case involving Warren Meyers, a 15-year employee of Chevron Canada, demonstrates these perils. Meyers had changed roles several times with his last position being applications development team lead in IT. Three employees and two contractors reported to him. When Chevron implemented a restructuring that reduced the number of supervisors, Meyers applied for a manager IT position (a promotion) but was offered a business analyst position. Although the pay and benefits would not change, Meyers considered it a demotion because it would limit his opportunity for advancement, no employees reported to him and he would move into a cubicle from an office. He considered the cumulative effect of this change humiliating, degrading and a constructive dismissal.

The court dismissed his claim, finding that Meyers remained at the same level of salary and the other changes were not fundamental. Ironically, after the restructuring, two of the three people who held the business analyst position that Meyers had rejected have been promoted to manager IT, the position he had coveted.

Employees who are subjected to changes in their workplace should pause and consider the following before choosing to quit:

Do not respond immediately. State that you wish to consider the new offer – and then elicit advice from a specialist;

Do not react emotionally. You are being offered a change so your services are still valued!

Look for ways to reduce humiliation. Ask your employer to take steps to reduce the perception of a demotion. Even suggest some actions. If the employer refuses your case is advanced;

Consider whether changes are fundamental. If pay and benefits are unchanged, arguing constructive dismissal is much more difficult.

Take a longer-term view. Try out the new position. You may find there is less stress, less overtime and you may still be eligible for future promotions. Where there are changes to your employment you can take a little while (two months is the usual maximum) to decide whether the changes are fundamental;

Consider the financial implications. If you quit and sue, your former employer will claim you resigned. You will receive no separation payment and, if Employment Insurance does not accept your constructive dismissal claim, will be ineligible for EI benefits. While your income and benefits will cease, your expenses (including legal fees) will not;

Be prepared for the long haul. Your trial will likely not take place for a couple of years while the uncertainty continues;

Have you mitigated your losses? You are legally required to do so by seeking comparable employment. Any income earned will be deducted from your claim. If the employer has offered you the same pay and benefits and you refused it, a court may find that you failed to mitigate. You will then lose entirely;

Consider the cost of losing. If you lose at trial, you still have to pay your legal costs and a portion of your employer’s costs.

In other words, look before you leap.