Recently, the Court of Appeal of Alberta, in Kosteckyj v Paramount Resources Ltd, found that an employee acquiesced to significantly reduced compensation by continuing work without raising any concerns for 25 days.


The Plaintiff began working for the Company as a senior integrity engineer in 2013. Effective April 1, 2020, in response to the economic downturn, the Company announced a cost reduction program ("CRP") that would decrease employees' base salary by 10%, suspend the 6% RRSP contribution, and delay or cancel the bonus program. There was no express or implied term in the employment contract allowing the Defendant to reduce compensation due to the economic conditions of the oil and gas industry.

The Plaintiff did not communicate any disagreement with the CRP and she continued to work at the same office carrying out the same duties as prior to the implementation of the CRP.

On April 22, 2020, in order to further reduce costs, the Defendant terminated certain employees, including the Plaintiff, on a "without cause" basis.

After the termination, the Plaintiff commenced a claim against the Company and eventually alleged constructive dismissal as a result of the CRP. The Company denied that the Plaintiff was constructively dismissed. Instead, the Defendant maintained that the Plaintiff's employment was terminated without cause on April 22, 2020 and asserted that pay in lieu of reasonable notice of termination was owed to the Plaintiff in accordance with the reduced compensation that the Plaintiff was earning at the time her termination.

The Decision at Trial

The Court of Queen's Bench of Alberta (as it was then called) ruled that the Plaintiff was constructively dismissed as of April 1, 2020 and awarded her 9 months' reasonable notice based upon her pre-CRP compensation package.

The Court found that the CRP was a significant reduction in compensation that amounted to a unilateral breach of the Plaintiff's employment contract. In determining that the Plaintiff did not accept or acquiesce to the CRP, the Court did not accept the Defendant's argument that the Plaintiff's continued work indicated her agreement to the CRP.

The Court of Appeal Decision

The Defendant appealed the finding of constructive dismissal. The Court of Appeal allowed the appeal and found that the implementation of the CRP was not a constructive dismissal (meaning that the Plaintiff's entitlements upon termination were to be calculated in accordance with her reduced post-CRP compensation).

The Court of Appeal agreed with the Trial Judge that the CRP a substantial change to an essential term of the employment contract to the detriment of the Plaintiff. The Court of Appeal also agreed that there was no express or implied term allowing the Defendant to reduce compensation. However, the Court of Appeal overturned the Trial Judge's finding that the Plaintiff did not accept or acquiesce to the changes.

The Court of Appeal focused on the context of the global pandemic, the decimated oil and gas industry, and the lack of movement in the job market to determine that the Plaintiff had acquiesced to the CRP prior to the termination of her employment. The Court of Appeal found that the 25 days between the announcement of the CRP and the termination of the Plaintiff's employment was sufficient for the Plaintiff to decide whether to accept the changes or leave and assert constructive dismissal. Because the Plaintiff's continued work for three weeks doing the same tasks from the same office without taking any steps to communicate her dissatisfaction with the CRP, the Court of Appeal ruled that the Plaintiff had acquiesced to the CRP and that she had therefore not been constructively dismissed.

Concluding Thoughts

The Paramount Resources decision suggests that employees may have a relatively short window of time to communicate their rejection of a reduction in compensation and assert constructive dismissal, particularly in the context of an economic downturn (where movement in the job market is less readily available).

However, this decision is highly context driven and we recommend taking precautionary steps before implementing a substantial change to compensation or other employment terms, in order to reduce the likelihood of a successful constructive dismissal claim. Steps to consider include:

  • obtaining a written consent before making substantial changes to an employee's terms or employment; and
  • incorporating an express term in employment contracts that allows the employer to reduce compensation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.