June 16, 2009

 

YOU'RE NOT FIRED: REDUCED WAGES AS GROUNDS FOR CONSTRUCTIVE DISMISSAL

Constructive dismissal occurs when an employer unilaterally changes a fundamental term of the employment contract, such that the employee is entitled at law to treat the employment as being terminated. An employee who is constructively dismissed has all the rights of an employee who is expressly terminated by the employer without cause.

The question lawyers are asked time and time again is what kind of fundamental breach by the employer will allow the employee to claim he or she has been constructively dismissed? In the recent case of Pavlis v. HSBC Bank Canada, 2009 BCSC 498 the BC Supreme Court addressed the issue of whether a failure to pay an employee a portion of her average salary resulted in constructive dismissal.

The Plaintiff, Marcia Pavlis, was employed by HSBC for approximately 3½ years. As an investment advisor, Pavlis was entitled to "trailer fees" – fees paid to investment dealers by mutual fund companies with whom an investment advisor invests on behalf of his or her clients. On two occasions, Pavlis was not paid the trailer fees to which she believed she was entitled. After she went on disability leave, the relationship between Pavlis and HSBC deteriorated significantly. This culminated in Pavlis asserting that she had been constructively dismissed as a result, in part, of HSBC failing to pay her the trailer fees to which she was entitled. HSBC took the position that she had resigned.

HSBC agreed that it had, through error, shorted Pavlis for some commissions owed to her (albeit not in the amount that Pavlis claimed). The Court found that regardless of whether HSBC or Pavlis was right about the amount of commissions shorted (between 2% and 5%), neither figure was significant enough to result in a finding of fundamental breach of the employment contract. Moreover, the Court concluded that the employer's delay in rectifying the error did not elevate the relatively small amount in dispute to a point where it constituted a fundamental breach. Thus, Pavlis's claim for constructive dismissal failed and the action was dismissed.

This decision is important because it establishes the following guidelines:

  1. A reduction or failure to pay an employee up to 9-10% of his or her average salary, does not amount to a fundamental breach of the employment contract.
  2. A reduction or failure to pay an employee between 14-17% can amount to fundamental breach, but only in conjunction with some other significant unilateral change to the contract.
  3. Failure to pay an employee 20% or more will by itself amount to a fundamental breach.

The practical implications of this case are significant, especially in the current economic climate. An employer who must resort to wage cuts as a cost cutting alternative can be guided by the Court's decision in Pavlis. Significantly, according to Pavlis, constructive dismissal will not flow from a 10% (or less) reduction in employee wages so long as no additional unilateral changes to the employment contract are implemented. Further employers may be able to implement reductions of up to 17%, particularly in our view where such cuts are implemented equally, to all employees.

 

YOU'RE NOT HIRED: AVOIDING RECRUITMENT DISCRIMINATION CLAIMS

Many of you have read about the recently published study of Professor Philip Oreopoulos titled "Why Do Skilled Immigrants Struggle in the Labour Market? A Field Experiment with Six Thousand Resumes". http://riim.metropolis.net/Virtual%20Library/2009/WP09-03.pdf Professor Oreopoulos observed that immigrants struggle in the domestic labour market – both in terms of unemployment rate and salary level – when compared to their equally qualified Canadian-born counterparts. Professor Oreopoulos's study makes three main conclusions:

  1. Canadian-born individuals with English-sounding names are much more likely to receive a callback for a job interview after sending their resumes compared to foreign-born individuals, even among those with foreign degrees from highly ranked schools, or the same job experience but acquired outside of Canada.
  2. Employers value Canadian experience far more than Canadian education when deciding to interview applicants with foreign backgrounds.
  3. Employers discriminate substantially by name; specifically, employer response rates to submitted resumes drop 40% when switching from a Canadian resume with a common English name to one with a common Indian, Chinese, or Pakistani name.

As Professor Oreopoulos suggests, these results might be based on employers believing that candidates with foreign names or from foreign locations have a higher chance of being linguistically or culturally challenged. Alternatively, employers may have a personal preference to hire individuals of similar ethnic or language backgrounds. Whatever the reason, it is important to keep in mind that the Human Rights Code prohibits discrimination in employment advertising and hiring, based on any of the prohibited categories, which include race, colour, ancestry and place of origin. Therefore, employers will want to ensure that their hiring practices do not expose them to discrimination complaints by unsuccessful applicants.

In order for an individual to successfully make out a claim of discrimination at the hiring stage, he or she must first show, on a balance of probabilities, that discrimination has occurred. However, if the employer is able to show some valid, non-discriminatory explanation as to why another individual was hired, the claim under the Human Rights Code will fail. For example, in Oxley v. British Columbia Institute of Technology, the complainant, who was of Cree ancestry, applied for a position as an Iron Worker with BCIT. Although he applied in a timely fashion, he was not granted an interview. While Oxley was able to make out a case for discrimination in the first instance, BCIT was able to show that the candidates ultimately hired for the position were more qualified. Oxley's claim was thus dismissed.

In Szarko v. Vancouver Coastal Health Authority and Grewal, there was a similar result. The complainant, who was of Polish descent, alleged that she had been passed over for a position as a casual cardiac technologist because the supervisor of the department preferred persons of Asian origin. The complainant was able to establish a case of discrimination in the first instance, in that she was qualified to be hired for the position, was not hired and someone not better qualified but of a different ethnic background was hired. However, the employer was able to show a non-discriminatory reason for the complainant not being hired and thus the claim was dismissed.

While BCIT and Vancouver Coastal Health Authority were successful in the end, they each still had to deal with a complaint, costing those employers time and expense. Therefore, it is still a good practice to follow the following advice when dealing with recruitment, in order to avoid claims of discrimination:

  1. Advertising

    1. Before you advertise, know the requirements of the job you are trying to fill and the qualities an ideal candidate will possess. If you later reject applicants for the position, you will be able to note specific and non-objectionable reasons why that applicant was not suitable.
    2. Avoid specifying skills (such as proficiency in a certain language) that are not essential for the job.

  2. Application

    1. If you use a standard application form, only ask for information that is essential to the selection and hiring process and decision making. Requesting the applicant's race or ethnicity is not acceptable. However, requesting a list of the languages in which the person is proficient is acceptable as long as there is a valid (i.e. work related) reason for doing so, such as customer demand.
    2. Be wary of using any application form created in the United States. They do not have the same human rights laws, and in some cases, they also have statutes which require certain data be gathered that in Canada would be unlawful (ethnicity, race, religion, criminal convictions).

  3. Interviews

    1. Conduct interviews with two or more interviewers present to provide a third person witness to the questions asked and conduct of the interview.
    2. Have a pre-set list of questions that are asked of everyone.
    3. Make notes with respect to the interview (procedure followed, answers received and observations about the applicant), and retain the notes.

  4. Decision making

    1. Make notes about how you arrived at your decision to hire or not hire an applicant.
    2. Retain copies of your notes, the application form and resume for each applicant.
    3. Communicate your decision to each applicant. Offer brief, objective reasons why that person did not get the position.

For a detailed discussion of these and other related issues, see our paper, Managing Recruitment, Succession and Retirement.

If you have comments on the content of these articles please email the author Valerie Dixon at: vsd@cwilson.com. We welcome your comments and feedback. Please let us know what you think of this publication by emailing the editor, Nicole Byres at: nmb@cwilson.com