THE QUESTION
I work at a daycare. Two years ago, the owner made a big show of increasing early childhood educator wages by a few dollars an hour so that everyone would be earning a living wage. Now I just received notice that because of changes in funding amounts, they are reversing the increase. They say that the lower wages are still on par with market rates for ECEs. Is this legal? What recourse do I have if we want to keep the higher wage?
THE FIRST ANSWER
Allyson Edwards, litigation partner, , Vernon, B.C.
Having one’s wages reduced is never ideal. While employers are free to unilaterally increase and decrease wages to some extent, the law does impose limits on the amount of decrease that will be deemed acceptable by the courts.
A significant reduction in pay may amount to a fundamental breach of the employment contract giving rise to a constructive dismissal claim against the employer (for example, that the employer’s conduct essentially brought the employment contract to an end, leading to claims for severance and possibly other damages on behalf of the employee). The amount of the reduction will be considered alongside any other contractual changes that negatively affect the employee as well as the notice provided to the employee about the reduction beforehand.
The decisions across Canada vary but, generally speaking, a unilateral reduction in pay that exceeds 10 per cent may be viewed as a fundamental breach of the employment contract, particularly if it is accompanied by other unilateral changes made by the employer. Critically, the employee must inform their employer that they object to the pay decrease without delay after the decrease is implemented. If the employee does not object, the courts have found that the employee “acquiesced” or consented to the change in pay.
In short, employers may typically reduce employee compensation by up to 10 per cent (or so) without triggering a constructive dismissal. Unfortunately, employees will often have limited recourse if they are unhappy with the decrease and may need to decide whether to seek new employment (and possibly advance a claim in constructive dismissal) rather than working under the new wage.
If you intend to resist the change, a good first step is to object in writing. Depending on your employer’s financial circumstances, you may be able to negotiate a lesser (and more manageable) reduction. If that doesn’t work, you should consider obtaining legal advice about the strength of a potential constructive dismissal claim.
THE SECOND ANSWER
Shibil Siddiqi, employment and human rights lawyer, , Toronto
This is the dark side of an inadequately funded $10-a-day daycare in Ontario; it frequently comes on the backs of child care workers who are expected to work for substandard wages.
Unfortunately, as a non-unionized employee, your options for retaining higher wages are limited. In Ontario, wages are typically set through agreements negotiated between employers and employees based on labour market conditions. Employers are generally required to meet the minimum wage – currently $17.20 an hour – but are not obligated to sustain wages above this level. Neither the courts nor Employment Standards Officers have the authority to require employers to maintain higher pay, regardless of perceived fairness.
That said, there are potential avenues for recourse. Employers can make minor adjustments to employment terms, but significant changes, such as a large wage reduction, require employee consent. Absent consent, a substantial wage cut could be considered constructive dismissal, allowing you to treat your employment as terminated and seek termination pay and severance. Because of the complexity of constructive dismissal claims, consulting an employment lawyer can help clarify any potential benefits of this option.
The determination of a “substantial” wage cut is case-specific, though a reduction of 10 per cent or more is typically viewed as substantial. For lower-wage employees, even smaller reductions can be significant if they affect the ability to meet basic expenses.
Additionally, you and your colleagues may benefit from requesting wage reinstatement in writing, stating that you do not acquiesce to the unilateral change to the terms of your employment agreement and are working under protest. This shows non-acceptance of the wage cut and could strengthen any future dismissal claim. Moreover, an employer is more likely to respond positively to a larger group of employees. In this vein, you may want to talk to your colleagues about unionizing. Unionized workers are generally able to bargain for higher wages and better protections from arbitrary wage decreases.
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