Employer removes working from home – Court rules constructive dismissal

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In Hagholm v. Coreio Inc. (December 2017), the Ontario Superior Court of Justice found that an employee’s ability to work from home was an essential term of her employment, such that when the Employer unilaterally took away this right, the employee was constructively dismissed. The Court awarded 20.5 months salary in lieu of notice.

Ms. Hagholm was 59 years old and had worked for the Employer for 22 years (although she had also previously worked for the same employer before resigning for a period of time).  Because Ms. Hagholm lived in the Waterloo Region, and the Employer’s office were located in Vaughan, at the time she was hired it was orally agreed that she could work from home 3 days per week. For the next 22 years, Ms. Hagholm worked in the office 2 days per week, and from home the other 3 days. In 2017, without discussion, the Employer advised Ms. Hagholm that she could no longer work from home.  The Employer did not offer any new compensation to offset the increased costs related to the additional travel.  Ms. Hagholm resigned and commenced a constructive dismissal action. Ms. Hagholm also alleged that she had been demoted, her bonus payment had been unilaterally reduced, and that she had been subject to a pattern of criticism and micromanagement.

The Employer argued that working from home was not a term or condition of Ms. Hagholm’s employment, pointing to the silence in her employment agreement and personnel file on this point. Rather, the Employer reasoned, working from home was simply a preference, which could no longer be accommodated for various business reasons.

The Court rejected the Employer’s arguments.  It found that there was an oral agreement permitting Ms. Hagholm to work from home, which had induced Ms. Hagholm to work for the Employer.  In the Court’s view this was an essential term of her employment, such that when it was removed, the Employer unilaterally breached the employment agreement and thereby constructively dismissed Ms. Hagholm. The Court found that the change in bonus calculation also constituted constructive dismissal. In light of these findings, the other grounds of constructive dismissal were not addressed.

The Court calculated Ms. Hagholm’s damages based on one month of salary per year of service, minus a small deduction in respect of the possibility that new employment could be found before the expiry of the notice period. This amounted to 20.5 months. Ms. Hagholm was also awarded compensation for lost benefits during that period.

 

In our view

Not every change implemented by an employer will result in constructive dismissal.  To amount to constructive dismissal, a change must be so significant that it evidences the intention to no longer be bound by the employment agreement.  Before implementing such a change, employers should seek the agreement of the employee, and provide lengthy notice of the change.

For further information please contact Adam Gamwell at 613-940-2736 or Justin Dubois at 613-563-7660 ext. 283.