Author: Howard Levitt
Publication: National Post
Lynn Hainsworth sensed something was askance when she had to manoeuvre her way on to the dais at the annual general meeting of the World Peace Forum Society. As the executive director for operations, her place at the head table should have been assured. She also wondered why, despite her senior role, she had to struggle to have her report included on the agenda.
Hainsworth worked alongside Jeff Keighley, an executive director for a different area of operations. This hydra-headed executive team, which reported to the board, inevitably generated friction between them. At the same time, some board members were becoming dissatisfied with Hainsworth’s performance.
Her worst fears were soon realized. Shortly after the annual general meeting, board members informed her that her title would change to co-ordinator of operations. Rather than reporting to the board, she would now be accountable to Keighley, her former peer. If she did not accept this new position, they warned, the Society would review her performance which, they ominously cautioned, would only harden opinion against her. Hainsworth’s told them she would respond after the weekend.
Following the weekend, she was summoned to Keighley’s office. He pressed for a decision. When Hainsworth told him she had not made up her mind and needed to first have a better understanding of the new position, Keighley was unrelenting: She had to decide. Believing she could maintain her current job and undergo the performance review, Hainsworth refused to accept the co-ordinator position. Keighley asked her to hand over her office and building keys.
Hainsworth sued, maintaining she had been wrongfully dismissed.
Rejecting the Society’s position that Hainsworth had resigned because Keighley had no authority to dismiss her, Mr. Justice Terrance Warren of the British Columbia Supreme Court ruled Hainsworth had, in fact, been terminated.
When Keighley asked her for her keys, it was reasonable for Hainsworth to assume he had fired her and that he had the authority to do so. After all, she had been told she would be reporting to him.
By rearranging the reporting hierarchy, redistributing Hainsworth’s responsibilities and requiring her to report to her former peer, the court found the Society had also constructively dismissed her.
Given the attitude of the board, the embarrassment accompanying the demotion and her unpleasant meeting with Keighley, Hainsworth could not have been reasonably expected to accept the co-ordinator job. No employee, concluded the court, is required to mitigate her damages by staying with an employer in a hostile or humiliating workplace.
The court ordered the Society to pay Hainsworth the value of the balance of the term of her contract. It also awarded her substantial legal costs.
The vulnerability of employers to lawsuits in corporate reorganizations is highlighted by this case:
1. If a reorganization effectively demotes an employee, consider whether the change will be humiliating or embarrassing.
2. Ensure employees’ contracts contain terms enabling inevitable corporate reorganization with minimal notice.
3. Consult with an employment lawyer on the legal implications of proposed reorganizations on the status of employees.
4. Carefully script how employees are informed of any changes and by whom.
Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers. He practises employment law in eight provinces and is author of The Law of Hiring in Canada, soon to be released.