Employer is reducing wages
There is no magic answer in these situations; the answer is often unique to each different case. But there are some general principles that should apply to many individuals and organizations in this kind of situation.
In some Canadian employment law cases there is clear evidence that a wage reduction of even less than 10% may trigger a valid constructive dismissal claim. Having said that, while it may be a technical dismissal in more normal circumstances an employee may still want to think hard (and fast) before deciding how to react to the proposed wage reduction, for the reasons below.
If a worker takes the position that they have been dismissed they usually must either: 1) make it clear they they view the situation as a constructive dismissal and the relationship as being at an end; or 2) they make it clear that they don’t agree to the wage reduction and that they are only staying on in their position in order to keep earning income (to at least preserve their potential claim for the shortfall they will likely experience).
But there is more: courts have found that employees who do not stay in their position in such cirucmstances may be acting unreasonably and a failure to stay in the position in such situations could result in damages suffered – over and above the shortfall of 10% – not being awarded to the employee due to their failure to act reasonable to try to mitigate such damages.
In times like these, staying employed may be the wiser or safer choice. (I should acknowledge that a worker suing an employer may be deemed as ending the relationship, or just cause for termination without notice or any pay in lieu (i.e. no common law severance pay) so get some legal advice about this but in my view that analysis should not apply in this situation most of the time.
The main takeaway is that there may be risks to both sides in this situation. For the employer, there is likely a risk of claims from numerous employees (or a class action) regarding damages stemming from its failure to give reasonable notice of the reduction in wages. *Note: the same analysis here may apply on a similar basis to an attempt to impose layoffs, which may not be legal in some cases.
On the flip side: there is risk for employees who go down this road, as outlined above. In uncertain times, many employees may wish to avoid risks and keep their jobs safe as a result – as brutal as that may be and feel. One thing employee stuck in this quagmire could do is let the employer know they “acknowledge the reduction and would like to reserve all their rights” without having to file a claim right away, since Ontario employees would have two years from the date of notice of the reduction to file a claim under the current legislation.
As a result of the above, I urge employees and businesses alike to get legal advice and I welcome folks to call me at 905-572-5806 or email me at firstname.lastname@example.org
for employment law advice.