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Media Centre :: Levitt's Corner ::

Changing an Employees Status Has Consequences: Steadily Eroding Someone's Job Can Land You in Court

Howard Levitt Financial Post: 10 August 2005 National Post: (c) 2005 National Post. All Rights Reserved.

With the chief executive as his brother, Norman Miller was confident he had job security. But returning from lunch one day, he was shocked to discover that his desk had vanished. It was his brother's doing.

Norman began working full-time for Milcorp Industries Ltd. when it was owned and operated by his family. Rising through the ranks, Norman became special projects supervisor. When the company was sold to ICO Canada Inc., his brother Dennis negotiated a lucrative four-year contract to become its CEO.

When Dennis's marriage to Kelly fell apart, Norman did not conceal that his sympathies were with Kelly not his brother. Dennis was not pleased with this "alliance."

Nonetheless, Dennis insisted that family and business would remain separate. To assure Norman that his position would remain unchanged with the sale, Dennis drafted an agreement on old Milcorp letterhead: Norman would retain his title, his private office and all the other perks that came with the job.

But that did not occur. Shortly after the agreement was signed, Norman was abruptly denied access to the maintenance shop. Then Norman discovered that equipment had been purchased without his having been consulted.

Over time, his duties diminished to the point that he had virtually no involvement in the company. Isolated from the company's operations, he was forced to busy himself with one-man labour jobs.

The erosion of whatever was left of his position continued. Dennis told Norman that he was thinking of cutting his pay. Shortly thereafter, Dennis accused Norman of divulging confidential information to Dennis's ex-wife.

New business cards were issued describing Norman's position as foreman. When Norman's desk disappeared, he was forced to work out of his briefcase. Even the janitor had an office and desk!

The removal of Norman's security clearance soon followed. The explanation given to Norman was that he no longer required after-hours access. Attending at work after his Christmas holidays, Norman found that a part-time employee had moved into his office.

After being hospitalized with a nervous breakdown, Norman accused Dennis of effectively firing him. In response, Dennis claimed that Norman's material duties remained unchanged. Unprepared to return to work under the altered conditions, Norman sued for constructive dismissal.

Dismissing Dennis's position that Norman's job was the same, Mr. Justice Binder of the Alberta Court of Queen's Bench found that the cumulative effect of all of these changes was that Norman had been constructively dismissed and awarded him 22 months severance.

The removal of his old functions and perquisites was a fundamental breach of his contract of employment.

Although Dennis denied it, the court found that Dennis was getting back at Norman for siding with his ex-wife. Condemning the shabby treatment of Norman, the court ruled that this was a case in which extra damages of four months should be awarded for the employer's bad faith and the resultant psychological harm.

In making changes to an employment relationship, employers should keep the following guidelines in mind:

  • Pay and responsibilities should never be reduced without reasonable advance written notice.
  • Even removing perks such as an office, assistant or title without notice can give rise to a lawsuit.
  • The fact that an employee is a family member is of no consequence to a court. It should not be to you.
  • The way that an employer goes about making changes to an employee's conditions will be scrutinized.
  • Ill treatment of an employee invites further damages.
  • An employer's motives in making changes will be a significant factor both in a finding of constructive dismissal and in the awarding of damages.