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Is it a constructive dismissal if senior staff does not buy into company?

Expert: Howard Levitt

Tom asked:

Is it constructive dismissal if a company asks its senior staff to buy a minority stake in the business for approximately $80,000 and then moves that person to a new, difficult territory and promotes less senior people over him based on their willingness to buy into the company?

Almost immediately after declining to buy into the ownership plan, the person in question was notified that he was going to be moved into a new territory, despite the fact that he had spent over 10 years in his current region, which was highly profitable, and was the president of a key industry association in that region. Two weeks later he found out about a corporate restructuring that would place less senior people above him in the organization, due to the fact that they had bought a minority stake in the company. Would that be considered constructive dismissal?

Howard Levitt answered:

There are two questions here and they are unrelated. The first deals with bringing in other people at a more senior level. The real issue is to what extent the employee is demoted and to what extent their remuneration is impacted. If there was a substantial impact in both respects (and I lack any information to opine), then that is a constructive dismissal.

With respect to moving you to a new territory, it depends on what the terms of the contract, if there is one, states. If there is no contract, then it depends on whether there is a practice of moving people around and, in any event, whether you can show that the move represents a substantial cut in your income and the new position has substantially less opportunity to earn commission.

About the author

Howard Levitt, Counsel to the national law firm Lang Michener. He is author of, The Law of Dismissal in Canada, The Quick Reference Guide to Employment Law and an upcoming book on Canadian Hiring Law. He is Editor In Chief of the Dismissal & Employmnet Law Digest.

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