Can a company reduce your salary in Ontario?

Apr 25, 2019

An employer cannot unilaterally change a fundamental term of employment without being at risk of a constructive dismissal claim. As this relates to salary, an employee’s pay is undoubtedly a fundamental term. If pay is reduced or altered significantly, an employee may choose to leave but claim that the change in pay left the employee no other option but to quit, as any reasonable person would have done the same. This, in turn, would trigger a constructive dismissal claim which in effect is a wrongful dismissal.
The remedies available to an employee faced with a constructive dismissal would be common law notice. This is payment in lieu of earnings over an estimated time it would take an employee to find comparable employment. Factors such as age, position, skill-set/credentials, continuous years of service and so on, are factors the courts will consider when deciding the number of damages owed for notice pay.
There are rare exceptions where a unilateral reduction in an employee’s salary would not guarantee a successful constructive dismissal claim. Although rare, a company undergoing financial hardship that reduces employees’ salaries by a small amount may successfully defend a constructive dismissal claim. Other considerations must include whether your employment agreement contains a written termination clause limiting your common law notice entitlement. It is yet to be seen whether a constructive dismissal claim could void such clauses, and any discrepancies in the wording of the clause as it relates to minimal standards will invalidate the clause. For these reasons, the services of an employment lawyer should always be pursued. It is always advisable to seek consultation from an employment lawyer before leaving employment to trigger a constructive dismissal claim.

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