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A recent Queen’s Bench of Alberta judgment shows that economic conditions have to be considered when deciding on damages after a wrongful dismissal, especially during a pandemic.
The case involved Olga Kosteckyj, the senior integrity engineer for Paramount Resources Ltd.. She had been hired in 2013.
On April 1, 2020, Paramount instituted a company-wide cost-reduction program, with employees’ salaries cut by 10 per cent. As a non-management employee, Kosteckyj’s base salary was reduced from $154,800 to $139,320. There was also a suspension of the six per cent RRSP contribution program and a “delay/cancellation” of the 2019 bonuses.
Three weeks after these changes in pay, Kosteckyi’s employment was terminated without cause. The two major issues that arose here, issues that are arising frequently during the current pandemic, are: (a) how much reasonable notice was this plaintiff owed (and how is that affected by COVID-19?) and, (b) should the company’s remuneration reductions be taken into account in calculating damages?
While Paramount argued that her damages should be based on the salary she was been paid when she was formally terminated, Kosteckyj countered that the severance should reflect her full salary of $154,800. She argued that she had been constructively dismissed on April 1 after a 10 per pay cut, the loss of the six percent RRSP program and suspension of her bonus.
‘A breach of her employment contract occurred’
Justice E.J. Sidnell sided with Kosteckyj, noting that a reduction in her compensation “in the range of 16.65% to 20% … was detrimental to [her] and that a breach of her employment contract occurred”: in other words, she was constructively dismissed.
Having established that Kosteckyj had been constructively dismissed, Justice Sidnell moved on to decide the appropriate notice period. Kosteckyj claimed she was entitled to 12-months’ notice while Paramount offered six-months. Interestingly, the COVID-19 pandemic was raised in both of their arguments.
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Kosteckyj claimed the longer notice period was warranted since she “has found very few employment opportunities that are comparable in terms of responsibilities or compensation with [her] previous employment with Paramount” because of the pandemic. For its part, the company notes she was terminated “as a result of serious and ongoing economic issues facing Paramount [which] included a significant historical reduction in commodity prices and the economic impact created by the COVID-19 pandemic.”
While these economic factors led to the cost reduction program and staff cuts, the firm posited, “these conditions should not have a significant impact on the length of reasonable notice which [she] is entitled to,” referencing a 1995 decision which stated that poor economic conditions should be considered “from the viewpoint of each party.”
Nine-month notice period awarded
After considering both arguments and the Bardal factors (the length of the worker’s service, age of the worker at termination, character of the job they have lost, and availability of similar employment), Justice Sidnell ruled that Kosteckyj is entitled to nine months’ notice with the nine months calculated from her full salary before the reductions brought on by the pandemic.
This decision truly recognizes the employment reality the pandemic has given us. Jobs are scarce, so notice periods should be extended. Further, basing the damages on regular pay levels instead of the ones imposed weeks before termination is also a sensible decision.
Firms should never be allowed to cut someone’s salary just before terminating them in the hope of paying less in damages. If that were allowed, it would lead to abuse and unfairness. Indeed, statutory provisions in most provinces prevent certain damages calculations that take into account recent changes like these.
This is a solid decision and a good reminder that the courts are willing to consider the hardships brought on by COVID in their decisions.
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