Saturday, 10 February 2018

Employers May Not Make Changes to Terms of Employment During Working Notice Period

In the 1997 movie “Wag the Dog” the spin doctors hired to get the President re-elected release an ad campaign with the slogan “Never change horses in mid-stream.” That idiom serves as a powerful and important reminder for employers that might seek to change the terms of an employee’s employment during a period of so-called “working notice.”

In a short decision released by the Court of Appeal for Ontario, Nufrio v. Allstate Insurance Company of Canada, 2017 ONCA 948 (CanLII), Ontario’s top court reinforced this principle.

Facts

The facts of the case as set out by the Court of Appeal are simple and straightforward. On July 24, 2007, the employee, Nufrio, received notice of fundamental changes to his employment contract with his employer, Allstate. He was given working notice up to September 1, 2009.

Nufrio accepted the working notice. In fact, he indicated that he intended to retire from his employment with Allstate at the end of the notice period.

However, in October 2008, Allstate sought to impose immediate changes to the employment relationship by requiring Nufrio to close his neighbourhood office and move to an office operated by Allstate by November 1, 2008. These agreements were referred to as, the Allstate Agent Compensation Agreement (the “830 agreement”) and the Neighbourhood Office Agent Amendment (the “NOA”). Nufrio refused, insisting on operating under the previous agreements during the notice period.

Nufrio’s refusal led to his termination for cause on November 6, 2008.

The trial judge, the Honourable Justice Andra Pollak of the Superior Court of Justice, found that Nufrio was properly terminated for cause on November 6, 2008. In her view, Allstate had the right to impose the new terms of employment, since Nufrio had been given reasonable notice of the changes.

Decision

In reversing Justice Pollak’s decision, the Court of Appeal for Ontario (Rouleau, Benotto and Roberts JJ.A.) held as follows:

[5] In our view, the trial judge erred by not addressing the question of whether the change in location, including the change to the business model under the NOA, could be made by [Allstate] during the working notice period. She also erred by not considering whether the NOA precluded them from unilaterally requiring the changes to the appellant’s business model and location.

[6] In this court, [Allstate] maintain that the 830 agreement entitled them to require closure of [Nufrio]’s office and his relocation to the Allstate operated office.

[7] For his part, [Nufrio] asserts that the NOA, which amended the 830 agreement, precluded [Allstate] from insisting on his relocation.

[8] We agree with [Nufrio]’s submissions. The proposed relocation was more than a geographic relocation of [Nufrio]’s office; rather, it was a fundamental change to the business model that had been agreed to under the NOA.

[9] [Nufrio] was entitled to continue to operate in accordance with the 830 agreement and the NOA during the period of working notice to September 1, 2009, as had been set out in the respondent’s July 2007 letter. The NOA precluded [Allstate] from unilaterally imposing the changes during the period of working notice.

[10] Accordingly, [Nufrio] is entitled to compensation for the balance of the notice period from November 6, 2008 to September 1, 2009, a period of nine months and 25 days. We agree that it is to be calculated on the basis of $20,000 per month.

[11] Further, it is clear from a plain reading of the 830 agreement that any compensation interest [Nufrio] had in renewed insurance policies ended with the termination of his employment, despite his argument to the contrary.

[12] Accordingly, the appeal is allowed in part. Costs to [Nufrio] fixed at $7,500 for the appeal and $60,000 for the trial, both are inclusive of disbursements and applicable taxes.

Commentary

First, I should point out and confirm that I have essentially reproduced the whole of the decision. As I said, it was short.

Second, my comment about not changing horses mid-stream is underlined by the court’s comment that the contract amendment precluded Allstate from unilaterally imposing the changes during the period of working notice.

What I found peculiar, however, is that there is not a lick of law in this decision. Not a case, not a statute, nothing. Maybe the same was not required given the facts, but it might have been helpful.

For example, it might have been helpful had the court made reference to section 60, (especially paragraph 1(a)) of the Ontario Employment Standards Act, 2000, which provides as follows:

(1) During a notice period under section 57 or 58, the employer,

(a) shall not reduce the employee’s wage rate or alter any other term or condition of employment;

(b) shall in each week pay the employee the wages the employee is entitled to receive, which in no case shall be less than his or her regular wages for a regular work week; and

(c) shall continue to make whatever benefit plan contributions would be required to be made in order to maintain the employee’s benefits under the plan until the end of the notice period.

While the preceding paragraph imposes a statutory limitation during the statutory notice period, i.e. “a notice period under section 57 or 58”, what the decision in Nufrio appears to signal is that employers may not “alter any other term or condition of employment” during any period of reasonable notice either.

Takeaways for Employees with Labour Pains

The takeaway for employees is that employees need not accept a fundamental unilateral change to the terms of their employment, even if such notice comes during a period of working notice. While I maintain that employers retain the right to make unilateral, fundamental changes to the terms of an employee’s employment, (see my posts How Employers Can Make Fundamental Changes to Terms of Employment and The Legality of Taking Away Paid Breaks and Benefits), employers must implement such changes correctly.

If you are an individual looking for assistance with respect to the interpretation or enforceability of the terms of your employment contract, contact the professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP; we would be happy to be of service to you.

Takeaways for Employers with Labour Pains

As I have said with respect to other cases concerning unilateral, fundamental changes, there are really two lessons for employers from this post:

First, employers should consider the business and goodwill implications of making fundamental changes to its employees’ employment.

Second, employers legally can make unilateral, fundamental changes to the terms of their employee’s employment, so long as: (a) reasonable notice is provided; and (b) the result remains legal.

If you are an employer and you need to make changes to the terms of your employee’s employment, or if you want to introduce written employment agreements with your staff, the professional, experienced and cost-effective employment lawyers for employers at Ottawa's Kelly Santini LLP would be happy to be of service to your business or organization.

Contact Me

To reach the author of this blog, Sean Bawden, email sbawden@kellysantini.com or call 613.238.6321 x260.

Sean P. Bawden is a partner with Kelly Santini LLP, located in Ottawa, Ontario, Canada. He practices in the areas of employment law and civil litigation. He has also taught Trial Advocacy for Paralegals and Small Claims Court Practice at Algonquin College in Ottawa.

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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Photo Credit: (c) istock/ronniechua

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