Workforce Restructuring: Four Legal Landmines to Consider
By Kristen Woo, Fasken
As we continue our efforts toward economic recovery, many businesses are contemplating a workforce restructuring, which may involve downsizing and eliminating jobs, merging the responsibilities of two or more positions, and reorganizing reporting structures. While restructuring a business may result in reduced labour costs, it can also attract costly and stressful litigation if poorly handled. Below is a list of four legal landmines to consider when planning a workforce restructuring:
- Individual and Group Termination Liabilities. Preparing for termination liabilities is an essential step. Employers will need to consider employees’ statutory, contractual, and/or common law entitlements to notice of termination, whether to provide employees with working notice, severance pay, or a combination of both, whether additional group termination obligations under employment standards legislation are triggered by the restructuring, and whether to seek a release of claims from employees, among other things.
- Constructive Dismissal. If an employer changes fundamental terms of employment without the employee’s consent, the employee may treat the employer’s actions as a constructive dismissal and sue for damages as if they had been terminated without cause or notice. Reduced compensation, changes to hours of work or job responsibilities, or new reporting hierarchies are just some examples of changes that may give rise to constructive dismissal. To secure an employee’s consent to the changes, the employer may want to communicate that the changes are necessary to keep the business viable and to allow for their continued employment, as job security has been top of mind for most employees throughout the pandemic.
- Employees on Leave. Employers are often hesitant to eliminate the positions of employees who are on a maternity leave, disability leave, or another leave of absence. However, the fact that an employee is on a maternity or disability leave does not automatically mean their employment cannot be terminated without cause in the context of a legitimate business restructuring. Employers should document their restructuring plans in writing to prove that no ground protected by human rights legislation, such as sex or disability, was a factor in the decision to eliminate an employee’s position. Employers should also be mindful of termination liabilities for employees on leave, as working notice cannot be provided if the employee is not working.
- Discrimination and Retaliation Complaints. Employees may claim that decisions to promote, demote, or terminate were discriminatory on an individual basis (for example, where an employee is terminated because of their race, age, or gender) or on a systemic basis (for example, where objective selection criteria has an adverse impact on a group of employees of the same race, age, or gender). Employees may also claim that decisions to demote or terminate were unlawful retaliation for complaints they filed against their employer, such as unsafe work refusals or bullying and harassment complaints. Accordingly, the importance of carefully considering and documenting the selection criteria used for restructuring decisions cannot be stressed enough.
With proper planning, these landmines can be successfully navigated to mitigate the risk of employment-related litigation. Seeking legal advice is recommended, as the impact of workforce restructuring on individual employees will need to be assessed on a case-by-case basis.
Kristen Woo is an associate in the Labour, Employment and Human Rights practice group at the law firm Fasken. Fasken is one of Canada’s leading business law firms, with more than 700 lawyers, spread across 7 offices in Canada and 3 offices around the globe. More information can be found at www.fasken.com.
This column is intended to convey brief, timely, but only general information and does not constitute legal advice. Readers are encouraged to speak with legal counsel to understand how the general issues noted above apply to their particular circumstances.