Employees insisting on working from home can be given a choice: Work at a reduced salary or return to the office

By March 25, 2021 No Comments
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Howard Levitt: I am no advocate of remote work but I am eager to support innovation in human resource management

Spotify, Salesforce.com, Inc. and Slack Technologies, Inc. have all announced that their employees can choose to work from anywhere — permanently.

Does this mean jobs currently at Spotify’s 179 John St. location in Toronto can now effortlessly be outsourced to other countries? After all, if Canadian employees can perform their work from Miami, why can’t Miami employees be hired to perform the same job. Except that it will not be Miami employees being recruited for the average job, but citizens of countries with lower pay and weak currencies taking jobs previously performed by Canadians.

By the time Canadians learn the answer to this, it will be too late. Pervasive remote work will have unintended long-term, deleterious consequences to our tax and employment base. Although I have warned of this for some time, the Bank of England recently echoed its concern at this threat to our long-term prosperity. Studies also show that remote work significantly reduces productivity per hour worked.

I am no advocate of remote work but I am eager to support innovation in human resource management. If such innovation reduces constructive dismissal claims, I will be the innovation’s foremost proponent.

In 2015, Dan Price, founder and CEO of U.S.-based Gravity Payments, a credit card processing company, famously announced a minimum wage of $70,000 per year. As the COVID-19 impacted the business last year, Price announced he would work for free for the time being and asked his employees how much of a salary reduction each is willing to absorb — 98 per cent agreed to cut their wages. Among them, 10 were willing to work for free and many offered to reduce their wages by 50 per cent. Had Price reduced employee salaries unilaterally, as many employers have done in Canada, he would have faced a slew of constructive dismissal claims in this country, devastating that company’s morale and bottom line.

Price’s own decision to forgo his salary and his high voluntary minimum wage may offer an explanation as to why his employees so readily agreed to reduce their own.

Most employers are unlikely to follow Price’s radical approach to human resource management. But there is a lesson. High employee satisfaction drives growth — and can reduce lawsuits. One way to maintain employees’ satisfaction is to keep them engaged.

Short of adapting Price’s methods, there are other strategies.

Communicating with employees on a regular basis, informing them of the company’s decisions and its reasoning are all good practices. Engaged employees, like those at Gravity Payments, tend not to litigate. At law, if employees acquiesce to a change, it precludes later constructive dismissal claims. In the context of layoffs and salary reductions during this pandemic, waiting makes it too late to change one’s mind later and sue.

Take the case of Thomas Anstey. Fednav Offshore Inc. reduced his salary by half. After more than two years, Anstey commenced litigation, seeking to enforce the employer’s obligation to pay the higher salary. When he sued, Fednav terminated Anstey’s employment entirely. He then commenced a second lawsuit for wrongful dismissal.

The court dismissed the first lawsuit because Anstey had waited too long, accepting the reduced salary. The second lawsuit was straightforward. He was dismissed. But his having accepted the salary reduction had consequence. In the second, wrongful dismissal lawsuit, the court awarded severance based upon Anstey’s salary at the time his employment was terminated, not the higher salary he formerly had.

Had Anstey sued immediately after his salary was reduced, he would have been awarded double the amount. The case is a cautionary tale for employees. If your salary is reduced or you have been placed on a layoff, sue immediately. If you wait, you may not get another opportunity and, if you do, it may be for a lower amount.

If employers are concerned at being sued for constructive dismissal when laying off employees, they should provide staff a choice: either accept a layoff with the promise of recall when conditions improve or accept termination with a severance package

Employees who select the layoff will be precluded from claiming constructive dismissal as they made a voluntary legal agreement. This suggestion may not resonate with employers because they, in such large numbers, laid off employees with impunity a year ago. But conditions were different then. Employees were fearful that if they did not accept a layoff there were no other jobs to be had. With the economy recovering and more employees aware of their rights, employers will not be that fortunate again. They should consider this next time.

If an employee resists returning to the physical workplace and insists on working remotely, provide the employee with an option: either accept a reduced salary and continue working remotely or receive full salary if the employee returns to the office. The employer has the right to force employees back to the office on the same terms, but letting them continue working from home, but at a reduced rate, can be an attractive option for both.

Other business decisions such as drastic changes to employees’ job duties or a reduction in wages should be made in consultation with the employees who are requested to accept the change. Employers should maintain a record of their acceptance. This too will avoid future constructive dismissal claims.

Given that reductions in wages, hours or layoffs all constitute constructive dismissals, employees are more likely to sue today than a year ago. When that occurs, employers are going to have to consider strategies to enable such changes as they become necessary.