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Media Centre :: Levitt's Corner ::

Shuffling Manager Could be Seen as Dismissal: Profit Losses Don't Justify Drastic Demotion

Howard Levitt Financial Post: Wednesday, July 09, 2008. All Rights Reserved.

Frank Power knew his career at Unique Chrysler Plymouth was drawing to a close when he was shuffled into an office that was last used for storage. Power was the dealership's general manager, in charge of the entire operations. But Sandy Calder, Unique's owner, decided to take matters into his own hands when the business's finances became unstable, and profits were inconsistent.

One Monday morning, Power arrived to find Calder's belongings sitting outside his office. He was waiting for Power to vacate it so he could move in. The storage area Power was relocated to shut him out of the flow of the showroom. Soon, his responsibilities were lessened. Sales managers ceased to report to him. Other staff stopped interacting with him. The office manager no longer consulted him. Communications with the owner diminished and Power was left out of meetings. His volume of work dramatically declined. To add insult to injury, Power was moved again -- into a space in the service and parts department.

In the interim, Calder found a new partner to inject cash into the business. Unable to continue to support the general manager's position, Unique gave Power notice his employment would end in six months. Power, however, left Unique and sued for constructive dismissal.

Rejecting the employer's contention Power had agreed to simply realign the focus of his work to service and parts, Ontario Superior Court Justice Blenus Wright found he was constructively dismissed. He noted Power could no longer function in his job and that his core duties in sales had been unilaterally renewed by the employer. He said the office space reassignments were unreasonable.

Power was not required to accept these changes nor to continue working during the notice period. Unique was ordered to pay Power significant damages, prejudgment interest and legal costs.

When considering changes to an employee's responsibilities, employers should be wary. Financial difficulties alone will not justify serious demotions or reductions in responsibilities without giving rise to claims for constructive dismissal. Employers should consider the following questions, before making changes:

  • Do the proposed changes substantially diminish the employee's duties and core functions?
  • What effect will the changes have on the employee's status among peers or reports?
  • What continued involvement will the employee have in his or her business duties?
  • Can the employee's agreement to these changes be elicited and confirmed, without giving rise to arguments of duress?
  • Is the employee being given sufficient notice?
  • What measures are being put in place to maintain his or her dignity?
  • Can alternate or comparable duties be offered?
  • What is the cost and risks to the employer, if the employee sues for constructive dismissal?