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To avoid mass lay-offs, many employers are reducing their employees’ wages without reducing their work hours.

If you belong to this group of people, you must be feeling frustrated and confused – you are not alone.

A constructive dismissal is defined as a substantial change to the terms and conditions of your employment.

Generally, a reduction in your salary could constitute a constructive dismissal. A constructive dismissal is defined as a substantial change to the terms and conditions of your employment. There is no hard and fast rule but generally a salary reduction in the range of 20% will be viewed as a substantial change. You have three options when this happens:

  1. Accept the change;
  2. Treat the change as a constructive dismissal, triggering your termination entitlements; or,
  3. Try out the change for a few weeks and then decide on one of the above options.

There are risks to treating this as a constructive dismissal. First, if the change is temporary, your constructive dismissal claim may fail.

Second, you have a  duty to mitigate your damages. If you treat the salary reduction  as a dismissal, you are triggering your notice requirements. Upon termination, an employer has a duty to provide you with your statutory notice (under the Employment Standards Act) and sometimes with a common law notice period (depending on the terms of your contract). You are required to mitigate your damages during this common law notice period. Mitigating your damages may mean working with the employer, at the reduced rate. At the end of this period, you are now out of a job and get to join to the millions of unemployed Canadians.

Your obligation to mitigate by working through the notice depends on reasonableness. If you are the only individual on your team to receive the reduction—then this might not be reasonable for you to stay with the employer and continue working through the notice period. But if everyone has had a salary reduction and you are not singled out, then it may be reasonable to work through this notice.

What to do if my salary is being reduced

Ultimately you are stuck between a rock and a hard place—your employer does not need your permission to reduce your wage and the choice to treat it as a dismissal may not be a choice at all.

What you can do is ensure your employer has confirmed (in writing) that the reduction is temporary. Ask your employer if they are willing to provide retroactive pay at the end of the year if the profits did not decrease as anticipated.

While your rights have not changed in the midst of the pandemic, the labour market has. It may be more difficult to find another opportunity if you choose to treat the wage reduction as constructive dismissal. We encourage you to speak to your employer and find a solution if possible.

However, if you have exhausted all options, have complicated scenario, or you believe your employer is taking advantage of the current situation, we’re here help. Reach out to one of our experienced employment lawyers today


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This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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