This blog is in follow up with our blog entitled “Rogers Offers Employees Buy Out Packages or Voluntary Departure Packages to Restructure and Cut Spending”. To remind our readers, Rogers is planning on offering a number of its employees “exit” offers or “voluntary departure” packages as they are planning on cutting its business costs and will be restructuring as well in order to complete these cost cutting measures. So, what happens when an employer restructures their business? How does this affect the employees of that employer? This blog will provide some answers.

First, we will look at what exactly is “restructuring” in a workplace and how that can create employment law issues in the provincial jurisdiction context. We then look at the issue of constructive dismissal and how it may arise in the context of restructuring, again, in the provincial jurisdiction context. Finally, we address this connection with the current situation with Rogers.

What is Workplace Restructuring?

Simply put, a workplace is “restructuring” when an employer reorganizes its business to reduce costs and improve efficiency to improve profitability. This can also be called “reorganization” of a business. This restructuring commonly occurs during time periods when a business is under financial stress or strain due to things like a challenging economy or changes to their business’ specific industry.

Here are some common ways that an employer “restructures” its business:

• reducing the number of employees in the company;
• merging roles or tasks of employees;
• changing employee hierarchies;
• changing company departments by merging certain departments or eliminating them;
• merging with other employers or companies;
• outsourcing certain roles or departments to sources outside of the employer’s business;
• removing certain products or services from their employer’s business; or
• using new products, services or technologies to improve efficiency.

How Constructive Dismissal Can Result from Workplace Restructuring

To remind our readers, constructive dismissal occurs when an employee’s fundamental terms of employment are unilaterally changed by their employer. These changes must be serious such that it would be unreasonable for the employee to stay or accept those changes. The crux of virtually every constructive dismissal case is that an employer makes or intends to make a substantial change to the employee’s terms of employment without the employee’s consent. Changes that are too small or that are made to less important terms of employment will not trigger constructive dismissal.

The bottom line is that an employee will have an increased risk of a claim of constructive dismissal when an employer decides to “reorganize” or “restructure” their business. For example, changes to an employee’s job duties or responsibilities, changes to the employee’s pay, increases or decreases in workloads, demotions, or transfers to a new work location or workplace may all result in a constructive dismissal claim by an employee depending on the circumstances and these actions are also very common in periods of reorganization of a business.

Restructuring and Layoff are Not the Same

It is very common for an employee to believe that they are “laid off” rather than dismissed when their employer has restructured their business even if their job has been “eliminated.” Employees often think that because the workplace has experienced a “restructuring” that they would be getting their job back in the future (i.e. that they were laid off and are subject to being recalled back). However, a layoff is a cessation of work not of employment. This means that if lawfully implemented, a layoff allows the employer to pause work without pay and without it being deemed a breach of the employment relationship (i.e. termination). It will allow the employer to essentially put work “on hold,” and not have to pay the employee their salary or wages during this period of a temporary break.

Legally speaking, provincially regulated employers in Ontario can only layoff an employee temporarily if they are legally contracted to do so. It is not simply the case that an employer who has reorganized their business or undergone a restructuring can “layoff” an employee from their job, even temporarily, absent an enforceable contractual term in the employment contract. An employer only has the right to layoff an employee if that right is found in the employment contract despite there being provisions in Ontario’s Employment Standard Act, 2000 (“ESA”) regarding layoffs. Unless the parties have legally agreed to a possible layoff in the future, an unlawful “layoff” is wrongful dismissal. Thus, the reason for the employee’s dismissal, other than for cause, is not really relevant. If the employer chooses to “restructure” its workplace without an enforceable right to layoff, the fact that the workplace has been restructured is irrelevant – in such an instance, the employee will be entitled to both statutory and potentially common law entitlements for failing to provide the employee with notice of termination or termination pay.

We have a lot of blogs on the topic of layoffs in Ontario. This is a common issue in employment law. Please see:

• 3 Legal Issues to Watch Out for When Employment Ends
• My Employer is Going to Shutdown or Sell the Business. What Should I do?
• GM Layoffs in Ontario: What Employees Need to Know

What is an Employee Owed if they are Terminated due to a Company “Restructuring” in Ontario?

When an employee has been dismissed from their job due to restructuring, the employer must provide the employee with either written notice of the termination, termination pay in lieu of that notice or a combination of both. Termination pay is simply monetary compensation to the employee in lieu of notice of the termination. Sometimes the employer will provide no notice to the employee or less notice than what the employee should have received from the employer.

Statutory entitlements under the ESA are minimum entitlements and an employee’s notice period owed under the ESA is based only on how long they have been working for the employer (one week of notice for every year that the employee worked the employer up to eight weeks). An employee may be entitled to a significantly longer notice period under the common law.

Termination pay at common law is based on “reasonable notice.” Reasonable notice is simply the amount of time that an employer should provide the employee before the employee’s job ends. The length of this notice is determined based on a variety of factors. These factors include age, position, length of service and the ability to find new alternative employment. When an employer requires the employee to work during their notice period, this is called “working notice.”

The amount of common law notice is determined by using a variety of factors. These factors include:

• the employee’s age;
• length of service;
• character of employment (such as the employee’s job description or position); and
• the availability of similar employment, having regard to the experience, training and qualifications of the employee.

Courts in Ontario will award an employee with pay in lieu of reasonable notice up to 24 months’ common law notice depending on the various factors we have mentioned above. In exceptional circumstances, Ontario courts can award notice periods to dismissed employees above 24 months.

Let’s Discuss Severance Pay in Ontario

Termination pay and severance pay are not the same. This is one of the most common misconceptions by the public and individuals often discuss “severance pay” and “termination pay” interchangeably as if those terms are equivalent. They are not.

With regard to severance pay, the employee is only entitled to severance pay compensation if they meet certain criteria that are set out in the ESA. Under the ESA, the employee must have worked for the employer for five (5) or more years. The second criterion is that the employer must have a payroll of at least $2.5 million.  An employee may also be entitled to severance pay if the employee was subjected to a mass termination in accordance with the ESA. If those criteria are not met, then the employee will not be able to obtain “severance pay.”

Three Things an Employee Should Immediately do if They are Handed a Termination Letter Due to their Employer’s “Restructuring”

1. The employee should not sign or accept the termination package right away. The fact is, in most cases, employers will artificially set a date by which the employee must “accept” the termination or severance package as a pressure tactic to get the employee to agree to compensation that is less than what is legally owed to them.
2. The employee should gather their documents including their termination letter, termination package and / or severance package and employment contract. These documents can be used by the employee and an employment lawyer, if the employee decides to approach an employment lawyer to discuss their case, in order to determine what compensation the employee is entitled to upon termination and what the next steps are for the employee to take.
3. The employee should approach an employment lawyer. An employment lawyer will be able to help an employee obtain the highest amount of compensation available to them upon their dismissal.

The Case with Rogers

Rogers is a telecommunications company that is federally regulated and subject to the Canada Labour Code, 1985 (“Code”). Unlike its provincial statutory counterpart, the ESA, the Code is unique in that it provides non-union employees with certain “union-like” protections. Provided that certain criteria are met, a federally regulated employer (such as a telecommunications company, a bank, etc.) can typically only dismiss employees for just cause or in the event of a “discontinuance of function” (i.e. restructuring), not upon the provision of reasonable notice per se. This means that federally regulated employees, such as those employed by Rogers, may be dismissed in the future presumably because Rogers is eliminating various roles and is reorganizing or restructuring its workplace (i.e. a discontinuance of function). However, these employees may still be entitled to reasonable notice of termination at common law unless they have contracted out of it via enforceable employment agreements.

How Zeilikman Law Can Help

Zeilikman Law can help both employees and employers during a workplace reorganization or restructuring period. Zeilikman can review their case and provide strategies for either party in an effort to reach the best possible resolution.

For more information about this topic and other related employment law issues, please take a look at our blogs entitled:

• Is Your Workplace Restructuring?
• Terminations in the Banking Industry: What Employees Need to Know
• Bell Canada Dismissals: What Employees Need to Know About Their Rights to Termination and Severance Pay

Reach out to Zeilikman Law today at (905) 417-2227 or online here to get your questions answered about this topic and other employment law issues.