The Question
I was a director at the same company for more than three decades and requested a new position as I needed a change. I was asked whether I was interested in a senior role in a nearby city [Toronto]. I was, but I would need relocation assistance as I was not willing to commute to the new location each day. After about seven months, I was told that I would not be provided relocation support. The company was so sure I would take the new role that they hired a replacement for the job I was still doing. I was also told that if I didn’t take the new role they would reduce my job level. I was so shocked by the treatment that I resigned out of frustration. Do I have any legal rights to a severance package?
The First Answer
Nicola Watson, lawyer, Pink Larkin, Halifax,
Generally, an individual has three sources of legal rights with respect to their employment – the written employment contract (if any), employment standards legislation and the common law. Depending on the circumstances, when an individual is terminated by their employer, they may have a right to receive a severance payment under one or more of these sources. Often, the amount of severance an employee is entitled to is connected to the amount of time they have worked for an employer. As such, it is important for long-service employees to get legal advice when their employment relationship comes to an end.
Typically, the right to receive severance only arises if an employer terminates an individual without just cause. If an individual has resigned from their job, they generally aren’t entitled to any sort of severance payment. In fact, when an individual resigns, they may have other obligations to their employer, such as providing the employer with advance notice of their resignation.
However, when a resignation is prompted by an employer’s changes to an employee’s job, it might be considered “constructive dismissal” as opposed to an actual resignation. Not all changes to an employee’s job will amount to constructive dismissal – the change must substantially alter a key term of the employment contract. Examples would include a significant change in pay or work responsibilities. While constructive dismissal claims can be difficult to establish, it is worth considering if you were constructively dismissed. If you were, you would likely be entitled to a significant severance package given your length of service.
The Second Answer
George E. Cottrelle, partner, Keel Cottrelle LLP, Toronto
A resignation has very serious consequences, including loss of income, benefits and severance, which in your case, would be substantial. In certain circumstances, a resignation may be withdrawn. To be enforceable, a resignation must be clear and unequivocal and the employer should have given you reasonable time to reconsider before accepting.
If your resignation was forced by the employer’s actions constituting constructive dismissal, then you would retain your rights for severance, subject to some important considerations.
Constructive dismissal is never clear-cut, and depends on the facts. You requested a new position and were offered a senior role in Toronto, which was acceptable to you, provided you received compensation for relocation support, as you were not willing to commute.
Seven months later, the company unilaterally decided that you would be replaced in your role as director and transferred to the senior role in Toronto, with no relocation compensation, knowing you would not agree to this. Although the new role itself had been acceptable, the question is whether the loss of your position which you held for 34 years, and the non-negotiable transfer to Toronto, without compensation, constituted constructive dismissal.
Location transfers alone, which are within a reasonable commuting distance, generally would not constitute constructive dismissal, absent other factors. Employees who have been constructively dismissed have a duty to mitigate their damages. Mitigation may include a duty to accept a lesser role, provided it is reasonable to do so, while retaining the right to claim damages. Your employer’s actions were arbitrary and unreasonable and constituted constructive dismissal. However, you should have mitigated your damages by accepting the transfer and reserving all rights to claim damages. By resigning, you have forgone your ability to claim severance.
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