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Revoking Telecommute Agreement A Constructive Dismissal

The Ontario Superior Court recently found that an employee had been constructively dismissed when her employer reneged on its promise that she could work from home three days per week.

The Facts

The employee in Hagholm v. Coreio Inc. had worked for the employer, a Toronto-based company, for ten years before moving her residence from Toronto to Waterloo and quitting due to the commute. She continued to do some contract work for the employer. Two years later, the employer offered her another full-time position on the basis that she could work from home three days per week. The employee accepted, and worked for the employer in a managerial capacity according to these terms for another 22 years.

Approximately 20 years after she returned to the employer, the employer came under new ownership. Shortly after this, the employer alleged that the employee’s performance began to decline significantly, and she was put on a performance improvement plan for the first time in her career. The employer advised that she would no longer be able to work from home, and significantly reduced her bonus payment for the last quarter of the year.

The employee took the position that she had been constructively dismissed.

The Decision  

The Court found that the employee’s home was a considerable distance from the office, and that it was a term of the employee’s employment contract that she be allowed to work from home three days per week. The agreement had been made orally when she returned to work fulltime, and the employer had breached this term of the agreement and thereby constructively dismissed the employee.

The Court also found that the employee had regularly achieved 90% to 100% of her potential bonus throughout her career. The Court found that the employee’s final bonus had been calculated improperly and had been arbitrarily set by the employer in contravention of the contract.

The Court awarded the employee 22 months of salary in lieu of notice, plus $11,261 to compensate for the reduction in her last bonus, and compensation for the benefits she lost based during that notice period.

The Takeaway

Although the employer in this case raised issues about the employee’s declining performance, the Court does not seem to have taken that into consideration in its decision. Employers should seek legal advice to ensure they are not altering essential terms and conditions of employment in attempts to improve performance. This is especially the case when dealing with long term employees who have never received negative feedback on performance or been subject to performance management.

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