16 Aug Minimum Wage Increase and Constructive Dismissal
Legislation meant to help the precarious situation of minimum wage earners is having the opposite effect on some of these workers.
2018 brought with it an increase in the minimum wage for Ontario workers. For the hundreds of thousands of Ontario workers who earn minimum wage, the increase of minimum wage to $14 per hour from Bill 148 was a blessing.
Many employers, however, did not feel the same way. Business owners small and large alike have pushed back against Ontario’s minimum wage increase. Many have argued that increasing their employees’ wages will drastically cut into their bottom line. Some have even found creative ways to rebalance their budget.
Shortly before the minimum wage was increased, one Tim Horton’s franchise in Cobourg, Ontario sent a letter to its employees informing them that there would be some changes to their benefits and incentives. There were three main changes to their employment terms:
- Paid breaks were eliminated
- Benefits coverage was drastically reduced
- Incentives (like paid days off) were cancelled
Were these changes at the discretion of the employer? Or do they constitute a substantial enough rollback to qualify as a constructive dismissal?
According to the Supreme Court of Canada, a constructive dismissal occurs when “an employer decides unilaterally to make substantial changes to the essential terms of an employee’s contract of employment and the employee does not agree to the changes and leaves his or her job, the employee has not resigned, but has been dismissed.”
That is, when an employer makes significant and sudden alterations to an employee’s terms of employment, the employee may be in the position to treat their contract as having been terminated. In the case of a constructive dismissal, an employee’s resignation from the company may be considered a dismissal, entitling the employee to a severance package the same as if they had been terminated without cause.
The Tim Hortons situation raises a few questions with regards to constructive dismissal. Did the employees agree to the changes? Were the employees given reasonable notice? Are these changes considered substantial or fundamental?
Determining if changes made to the terms of employment like those in Cobourg constitute a constructive dismissal can be complicated. Claiming constructive dismissal carries a degree of risk, especially since there is no guarantee of compensation once an employee has left their position.
Takeaway for Employers
While the actions of the Cobourg Tim Hortons franchise owners have sparked much debate, they have not yet been litigated. Nonetheless, the situation is a good reminder to employers to make sure that any changes you wish to make to your employees’ contracts need to be done properly. An experienced employment lawyer can help you ensure that your changes are handled appropriately and legally.
If the increase in minimum wage has led to significant changes in the nature and compensation of your work, you should seek legal advice from an experienced employment law team before taking action. KCY at LAW can help you understand your rights and recommend the best course of action for your unique situation. Call 905-639-0999 to book your consultation today!