The Alberta Court of Appeal confirmed the test for constructive dismissal and reaffirmed that the onus is on the employee to decide whether they accept the new terms of employment within a reasonable timeframe - in this case, ten business days. 

The Facts

Kosteckyj had been employed with Paramount Resources Ltd. as a senior integrity engineer since 2017 and with a predecessor company acquired by Paramount since 2013. At the end of March 2020, Paramount announced that it would implement a cost savings program effective April 1, 2020, that included reductions to salaries and benefits. For Kosteckyj, this resulted in her annual salary being decreased by ten percent, the suspension of employer RRSP contributions of six percent of her salary, a delay to or cancellation of her bonus, and no further access to seminars or training.

On April 22, 2020, Paramount terminated Kosteckyj without cause as part of their cost-saving measures and only provided her with the statutory minimums. She filed a claim against Paramount, stating she was constructively dismissed as of April 1. Paramount argued that she was terminated on April 22; therefore, any award should be based on her reduced pay as of April 22.

The Court's Findings

At trial, the judge correctly stated the test for constructive dismissal:

An employer constructively dismisses an employee if the employer fails, from an objective perspective, to substantially discharge an essential obligation in the employment contract to the detriment of the employee, and the employee, within a reasonable amount of time, declines to accept the new terms.

The judge found that Kosteckyj had been constructively dismissed on April 1 and did not accept the new terms. He awarded her damages based on the income she earned before April 1.

Paramount appealed. The Court of Appeal pointed to the fact that between April 1 and April 22, Kosteckyj continued to work and did not express that she did not agree to the new terms of her employment. The Court stated that:

"The fact that she worked for three weeks doing the same tasks from the same office is clear evidence that she accepted the reduced level of compensation. The reasonable period to make up her mind – she was a healthy, knowledgeable and informed person – expired no more than ten business days after April 1, 2020."

As a result, the Court of Appeal overturned the trial decision and instead awarded Kosteckyj damages for wrongful dismissal based on her April 22 salary.

The Takeaway

When faced with a significant change to the terms of their employment, employees must decide within a reasonably short period whether or not they accept those terms. In this case, the Court of Appeal stated that ten business days was a reasonable time. Failure to protest and continuing to work will be considered evidence that the employee accepted the new terms and will undermine, if not defeat, a claim of constructive dismissal. 

If you are an employer and have implemented changes in the workplace that substantially altered your employees' terms of employment, if those employees continue to work and do not contest those changes within a reasonable period of time, they will likely be deemed to have accepted them. Please contact Angela Beierbach or any member of Field Law's Labour + Employment Group for guidance and assistance in this area.

Link to decision: Kosteckyj v Paramount Resources Ltd., 2022 ABCA 230