COVID-19 has brought to light more questions about employment law than ever before. While those still employed and able to work from home are considered the lucky ones, employers struggling to survive COVID-19 are taking bold actions that the courts are only just beginning to address.
In today’s blog, we will look at a constructive dismissal as it relates to COVID-19. Employers beware… Employees, take note.
The case of Kosteckyj v Paramount Resources Ltd, 2021 ABQB 225, was brought by Olga Kosteckyj, a former Senior Integrity Engineer in the Pressure Equipment Integrity team at Paramount. Paramount is a publicly traded company that works in petroleum and natural resources. While at Paramount, Kosteckyj led the management system and delivered training to team members. While she did not have anyone directly reporting to her, she performed many management responsibilities.
When COVID-19 began, Paramount stated they would be starting a cost reduction program across the company. This meant all employees would get a 10% salary reduction, a suspension of the pension program and delay or cancellation of bonuses for that year. For Kosteckyj, who earned $154,800, a 6% RRSP and an annual bonus, this meant a salary cut, the cancellation of her RRSP contribution, and unknown status of her bonus. Twenty-five days later, Kosteckyj was terminated without cause by Paramount.
Even though Kosteckyj accepted the pay cut, she sued for wrongful dismissal damages based on her full salary (pre-salary reduction), and the court sided with her. A constructive dismissal claim arises when an employer fundamentally alters a term or condition of an employee’s employment. Since she had been with Paramount for six and a half years and the reduction of income was a significant breach of her employment contract, Kosteckyj was constructively dismissed when the cost reduction was put in place 25 days before her termination, even though she did not resign or protest the pay reduction.
Since this case took place during COVID-19, Justice Sidnell awarded Kosteckyj nine months in wrongful dismissal damages, noting that she was terminated in the “midst of an economic downturn in the Alberta oil and gas industry and during the COVID-19 pandemic.” This case is useful for both employers and employees to know when navigating the uncharted territory of COVID-19 and employment law. For employees, this is an excellent case for those who wish to seek higher notice periods if they work in an industry that has experienced significant economic downturn as a result of the pandemic. For those who have received a significant reduction of pay, it is a smart idea to get some legal advice as soon as you can to determine your rights. For employers, it would be beneficial to look at this case and the growing case law discussing the impact of COVID-19 on wrongful dismissal damages to ensure you do not make a move that could cost your business dearly.
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