An employer cannot make unilateral and substantial changes to fundamental aspects of an employee’s contract or terms of employment without providing consideration or, in some cases, proper notice. Such changes can, as has been seen in cases such as Wronko v. Western Inventory Service, be deemed a repudiation of the employment contract on the part of the employer; they constitute a constructive dismissal. The employment contract is the cornerstone of the legal relationship between an employer and employee; neither party has the right to unilaterally change those terms in a substantial manner. If an employer proposes to do so, they must offer either notice or consideration, advise the employee that a refusal to accept the new terms will constitute insubordination and cause for dismissal.
What then, of the situation where an employee is given plenty of notice of the change, an opportunity to accept or reject a substantial change, and adequate consideration in exchange for this change? Will a refusal to accept the changes be just case for dismissal? According to a recent decision of the Ontario Superior Court, apparently this can be the case.
In Nufrio v. Allstate Insurance Company of Canada, the Plaintiff employee was terminated for cause after being employed for more than 23 years with the Defendant insurance company as a Sales Agent. He was subject to an employment agreement which provided that Allstate had the sole discretion to assign the work locations of sales agents, that the employer owned the business written by its employees, and that clients could be reassigned to different sales agents. In 2008, when the company announced changes to its compensation and sales distribution model for all employees, Mr. Nufrio refused to accept them. Particularly, his title would be changed to “Business Development Agent”, and he would have to relocate from one suburb of Toronto to another. He was given one year’s notice of the changes.
The Plaintiff tried to negotiate these new terms, arguing that the new agent distribution model fundamentally changed how he would sell products and be compensated. His claim was that under a 1998 agreement, he ran his own business autonomously and that these changes would cause him to lose that autonomy and certainty regarding his compensation. The company viewed this refusal as cause for dismissal, particularly given the fact that the Plaintiff had been given a lot of notice of the change and was offered continued employment with the only effective change being to his work location. He was guaranteed the equivalent of his current compensation for 24 months and was only being relocated from one suburb of Toronto to another; in fact , the company agreed that he could relocate to Scarborough instead of Etobicoke, as that was closer to his home. When he refused, he was dismissed for cause.
The employee sued and the court found that his refusal to relocate constituted just cause for dismissal in the circumstances. The Court reviewed the case law on this point, including Wronko, and concluded that Allstate had the right to impose new terms of employment on the Plaintiff. The key to this conclusion was the fact that the Plaintiff had reasonable notice that these changes to the terms of his employment would take place and that there was no evidence that he lost any compensation during the transition period. Furthermore, there was no evidence of anything unlawful or untenable about the new terms of employment. As the Court wrote:
An employer has the right to decide what terms of employment it is prepared to offer its employees. It cannot change terms of employment without giving an employee appropriate notice of the changes. Allstate did so in this case. Mr. Nufrio did not have the right to insist on employment terms he wanted.
The employer-employee relationship is one of delicate balances underpinned by legal obligations. Employers should not assume that they can simply change key terms of employment. At the same time, employees should be cognizant of the fact that employers may be entitled to impose changes with appropriate notice. Employers considering making any changes to an employee’s location, character, or nature of work should always ensure that they do so properly by providing consideration or notice. If done properly, then the employee’s refusal can result in cause for dismissal. Otherwise, it can lead to a finding of constructive dismissal against the employer.
Employers are strongly advised to contact us before being tempted to make any changes to an employee’s work conditions in order to ensure they do so in compliance with the law. Similarly, employees faced with a change in their employment conditions are cautioned not accept without seeking counsel, and are welcome to contact our lawyers in that respect.
By Richa Sandill
Author - Extraordinary Damages in Canadian Employment Law