With Damocles' sword of constructive dismissal lawsuits
looming over employers who wish to reassign staff, even a minor
misstep can prove costly.
A promotion to vice-president of operations with General Coach
Canada, a manufacturing company in Henshall, Ont., was a remarkable
achievement for Ken Farwell, who had started out as a general
labourer and rose to become a member of the three person executive
team responsible for operating the plant.
But his ascendancy was short lived. Roger Faulkner, the
vice-president of sales and marketing, chafed under this collective
structure and was able to persuade the U.S. head office to appoint
him vice-president and general manager of the plant with Farwell
reporting to him. Shortly thereafter, Faulkner was named president
with overall responsibility for the Henshall facility.
The impact on Farwell was immediate. Faulkner decided to return
him to the role of purchasing manager, a position he had held 16
years earlier. To add insult to injury, Farwell would be reporting
to a former subordinate who would become the operations manager.
Faulkner urged Farwell to accept the job as purchasing manager and
to help script the announcement of the new positions to staff.
Humiliated by the changes, Farwell rejected both requests. Farwell
left the premises immediately after his successor was announced and
was unable to return to work. He fell into deep depression and
eventually sued for constructive dismissal.
Both the trial judge and the Ontario Court of Appeal ruled that
the demotion to purchasing manager from vice-president of
operations amounted to a constructive dismissal.
But the analysis did not (and generally does not) end there.
General Coach argued that the changes were motivated by pure
economics and were not driven by animus. Faulkner had attempted to
dissuade Farwell from leaving. His direct report had new product
expertise that was the new focus of the business and it made sense
to promote him. Farwell had no rational reason to simply walk out
The Ontario Court of Appeal allowed that General Coach's
arguments had merit and Farwell might well have been obliged to
stay on in the new job, if a critical step had not been missed.
After Farwell rejected the new position, General Coach should have
nonetheless reoffered it to him. In this way, Farwell would have
been given the opportunity to stay on and mitigate his damages.
Because Farwell was simply allowed to leave and no offer was
extended, General Coach was stuck with an award of 24 months'
pay and legal costs.
This case illustrates the care that needs to be taken in
Use employment agreements Had General Coach incorporated a
standard provision in its contracts, giving it the discretion to
reassign staff to meet changing business needs, Farwell would not
have been able to sue.
Avoid humiliating staff In reconfiguring an organization, try to
maintain the dignity of long-term employees. The courts, as is
evident in this decision, are sensitive to their status and apt to
tilt judgments in their favour.
Appearances matter Ensure affected staff are not excluded from
decision-making sessions; maintain their original or equivalent
titles; keep their perks such as the corner office. These steps
reduce the risk of a finding of constructive dismissal.
Reiterate offers Even if an employee balks at accepting a
reassignment, and maintains it is a constructive dismissal, repeat
Be strategic Consider simply re-assigning the employee and
refrain from seeking their consent. If they refuse, remind them
that persistent refusal will amount to job abandonment and that
they will be disentitled to severance. After all,
"offering" someone a position implies they have the right
to say no. Assigning a new position implies its refusal connotes
abandoning employment. Many employers err in not recognizing that
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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