A 20% Pay Cut During COVID-19 is a Constructive Dismissal According to Alberta Judge

A judge in Alberta has made a decision that may be of interest to many employees and employers across the country. 

Case Summary

In Kosteckyj v. Paramount Resources Ltd. 2021 ABQB 225, an Alberta judge considered a situation where the employer implemented a salary reduction during the COVID-19 pandemic. Specifically, the employee’s salary was cut by 10%, RRSP contributions were suspended (worth 6% of salary), and her bonus was delayed. This meant a total reduction of approximately 16% – 20%. A month later, she was terminated without cause. 

The employee alleged she was constructively dismissed when her compensation was reduced. 

The measures implemented by the employer constituted a legitimate business reaction to the uncertain economic context caused by COVID-19. The judge did not extensively analyze that context or the employer’s need to implement this reduction. The judge made a finding that the reduction amounted to a total reduction of approximately 20% and this constituted a constructive dismissal. 

Takeaway for Employers

This decision does not close the door on employers arguing, in other cases, that a similar reduction does not constitute a constructive dismissal in the context of a global pandemic. However, it does provide one example of a judge applying a traditional lens to assess this question in the context of a pandemic.  

This decision also does not impact situations where employees explicitly or impliedly accepted a pay reduction. An implied acceptance could be established where an employee did not object to the pay reduction over a period of several months. The full text of the decision can be found here.

This update was authored by Harper Grey lawyer, Scott Marcinkow. Have questions regarding changes in the workplace as a result of the COVID-19 pandemic? Contact Scott at [email protected] or anyone else listed on the authors page.