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Stay or Leave: If you employer reduces your pay significantly?
Employment Law

Stay or Leave: If you employer reduces your pay significantly?

By August 10, 2020 October 26th, 2020 No Comments

When your employer unilaterally announced a significant reduction in your pay due to financial difficulties or any other reasons during your employment, should you stay and keep working at the reduced rates, or leave and treat the reduction in pay as constructive dismissal? The answer is LEAVE NOW and consult with a lawyer as soon as possible.

Stay and keep working can be considered a silent acceptance of the changes in your employment relationship with your employer, which may disentitle you from a constructive dismissal claim. However, even you explicitly objected the changes, namely the significant reduction in pay in your case, you cannot retroactively claim the difference between your old (high) wages and new (low) wages if you keeps working there and resign at a later date.

The decision Zaniewski v. Provincial International Cranes[1] has shed some light on this issue. The Applicant Employee, Mr. Zaniewski began his employment with a company called Detroit Hoist and Crane in April of 1986. In August of 1997 the ownership of the business changed from Detroit Hoist and Crane to Provincial and Mr. Zaniewski signed a document, offering him a salary of $37,900 per year.  That salary calculates at approximately $18.22 per hour.

His salary was initially reduced by Provincial in October 1997 to $16.00 per hour. Mr. Zaniewski complained to Provincial on a number of occasions.  There was no break in his employment for any period between the change in ownership from Detroit Hoist and Crane to Provincial.  Mr. Zaniewski protested this change but Provincial maintained the reduced salary.

Mr. Zaniewski resigned seven months later following the initial reduction in his pay, and stated that he was forced to resign from Provincial in May 1998 as a result of this change

The Labour Relations Board of Ontario decided that Mr. Zaniewski was NOT entitled to claim the difference in wages from October 1997 (the date his wages were reduced by Provincial) to May 1998 (the date he left employment).  He had no entitlement to continue working at the old (higher) rate.  His election to continue for that period does not create a liability in the employer to pay the higher rate because the applicant had no residual right to that rate.  The right he possessed was to claim constructive dismissal and if that claim were proven valid, to claim termination pay.  In these circumstances the applicant made it clear that he was not accepting the reduction and he preserved the right to claim constructive dismissal.

However, the constructive dismissal claim was still valid. The Board awarded Mr. Zaniewski for 8 weeks pay in lieu of notice in the amount of $5,120.00 ($16.00 per hour x 40 hours 8 weeks), at the reduced rates of salary.

Takeaways

If there is a salary reduction, quit your job, contact a lawyer and sue your former employer ASAP.

 

[1] Zaniewski v. Provincial International Cranes, 2000 CanLII 4962 (ON LRB).

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