Corporate restructuring often requires an employee to change roles. If that change constitutes a fundamental change to the employee’s employment contract, the employer may become liable to that employee for a constructive dismissal. But how significant must the change be to qualify as a “fundamental change” resulting in constructive dismissal?

A recent decision of the British Columbia Supreme Court provides valuable guidance concerning constructive dismissal liability for employers who implement corporate restructurings: Meyers v Chevron Canada Limited, 2013 BCSC 420.  Employers who plan to restructure should review and consider the British Columbia Supreme Court’s commentary concerning the restructuring process implemented by Chevron Canada Limited (“Chevron”) in this case.

Background

Mr. Meyers began his employment with Chevron as a Local Area Network Administrator. During his time with Chevron, he changed jobs several times. At the time of his alleged dismissal in July 2010, Mr. Meyers was an Applications Development Team Lead, responsible for supervising three employees and two contractors who reported directly to him.

In 2010, Chevron went through a major reorganization. The restructuring process involved a significant reduction in personnel. In order to accomplish the restructuring, existing positions were eliminated and new positions created. Chevron used a systematic framework based on pay scale groups (“PSG”) to offer these newly created positions to its employees. Each employee was asked to select five positions within his or her current PSG. A selection committee then ranked the top employees for each position and offered positions based on the ranking.

Mr. Meyers’ selected as his first two choices Business Analyst positions. This position offered the same compensation and benefits as his previous position, however, it did not comprise direct supervision of employees or have similar budgetary responsibilities. When Mr. Meyers was offered one of the Business Analyst positions, he refused to accept and brought an action for constructive dismissal. He argued that the new position was a demotion as he would no longer have significant management and leadership responsibilities.

The Case

The Court found that Mr. Meyers’ supervisory role was not rigidly defined and that there was no implied term in his unwritten employment contract that prevented Chevron from varying his management responsibilities. The Court acknowledged that there was some diminishment in Mr. Meyers’ responsibilities, but found that the diminishment did not constitute a fundamental breach or repudiation of the contract. To the contrary, Mr. Meyers continued to hold a leadership role as project manager and in that capacity would provide direction to all employees working on his project teams.

In addition, the Court acknowledged that Mr. Meyers may have lost some stature in his new position and would have had to sit in a cubicle instead of an office. Although Mr. Meyers viewed these changes as humiliating and degrading, the Court held his concerns were more subjective than objective. In the context of a significant downsizing operation, it was clear that Chevron considered Mr. Meyers to be a valued employee given that he was offered one of only few senior positions resulting from the restructuring.

The Court ultimately held that Mr. Meyers had effectively resigned and was not entitled to reasonable notice or damages in lieu of notice.

Implications

Although constructive dismissal claims are very fact-specific, the Meyers decision suggests that employers can reduce their liability for constructive dismissal by implementing a well-structured and legally-informed restructuring process. If your organization is planning to restructure, we encourage you to contact us for more information.

Many thanks to Claire-Marie Colantuoni for her assistance in drafting this blog.