Legal news and trends for Canadian in-house counsel and c-suite executives
Issue link: https://digital.canadianlawyermag.com/i/50880
costs through alternative means. The deal between the third-largest North American-based auto company and the Canadian Auto Workers union left hourly wages intact, while cutting a range of benefits. The package equates to a reduc- tion of $240 million in annual labour costs through cutting annual Christmas bonuses and flexibility of work rules making it easier for the company to hire temporary workers. As part of the deal, Chrysler cut the third production shift at its minivan plant in Windsor, Ont. The goal of the agreement was to allow for the automaker to avoid bankruptcy. Rachel Arbour, an associate practis- ing in the pension and benefits group at Hicks Morley Hamilton Stewart Storie LLP in Toronto, says some of the "more creative measures" employers are considering to survive the downturn include four-day workweeks — with an accompanying cut in pay — and unpaid days off. The trend is taking place across the country, with companies like Winnipeg's Boeing Canada Technology intro- ducing a work-share program for its staff to Hamilton, Ont.'s ArcelorMittal Dofasco, paying steel workers their full salaries while having them take vacation time on their added weekly day off. Even Nova Scotia underwear maker Stanfield's Ltd. has had to cut work hours. In Alberta, employment lawyer Andy Robertson says the days of employees having the upper hand are winding down. "We used to have crazy problems like the workers up in northern Alberta all wanting to go back to Newfoundland for Christmas as a crew," says Robertson, the chairman of Macleod Dixon LLP's employment practice group in Calgary. "The reality is if they did just leave, they'd get their job[s] back anyway." Now, oil-patch workers are finding even lucrative northern living allowances — extra pay usually aimed at compensat- ing for the high cost and isolation of living in places like Fort McMurray — are no longer a guarantee. As well, oil and gas companies are cutting back on benefits like car allowances and, because there's less drilling activity, they are pay- 24 • JUNE 2009 INHOUSE ing out less in daily bonuses for time workers spend away from home at well sites. "I'm obviously quite concerned about the far-reaching consequences of all these changes," Robertson says, not- ing the cumulative effect of the cuts can add up to major decreases in take-home pay for workers. Of course, such moves prompt the risk of constructive dismissal claims that the employer has unilaterally changed a fundamental term of the contract. Normally, assessing how likely that is to happen involves balancing concerns over the company's deteriorating per- formance and determining what conces- sions are reasonable to ask of employ- ees. But while a key way to mitigate that risk is by giving employees up to two years' notice of the change, Arbour finds employment contract. But, he points out, providing notice, seeking employee agreement to the change, and ensur- ing the reductions are across the board rather than targeting selected workers can help mitigate the legal implications. Including reductions to company exec- utives' wages also helps bring employees on side. In most cases, Palmer says a majority of employers are taking what he calls a "measured risk," including in a few cases where employees took 10-per-cent pay cuts. "I was nervous because I thought that was a bit aggressive but I was sur- prised that in the three instances there was actually no push back. It was a risk but it's a risk that's maybe manageable and worth taking and maybe better than just firing 10 per cent of the people." The legal people and the [human resources] people are trying to reframe the question to say, 'Can we look at reducing our employment costs by 10 per cent as a more general statement?' — DEAN PALMER, McCarthy Tétrault LLP employers are now less willing to do that given the need to cut costs quickly. "[Announcing] it today and having it become effective tomorrow is not something that's unheard of right now," she says, noting the courts' expectations of what is reasonable aren't necessarily any different than they were a year ago. "Truly, the legal risks have not changed. It's what makes the most sense for the companies [that] may have changed, and their willingness to take on some of these legal risks in light of dras- tic changes in circumstances seems to be what has changed. I think that compa- nies are trying to do what they see as the most prudent way of addressing their current financial circumstances." When it comes to avoiding construc- tive dismissal claims from salary cuts, Palmer says a general rule is that a reduction of 10 per cent or more could count as a fundamental change to the In the City of Toronto case, Kinastowski notes that the group rep- resenting workers affected by the salary restraint agreed to the move. "I might point out that there is an affiliation of non-union employees . . . and they're supportive of the wage freeze," she says. But the executive director of that group, the City of Toronto Admin- istrative, Professional, Supervisory Association, Inc., points out that that's not necessarily the case. In a recent letter to city council, Richard Majkot wrote that the association would accept a cost-of-living freeze only if the city's unionized workers got the same deal. As well, the letter argues that employees should at least get a one-time pay- ment for meeting their performance objectives since any increase they get is based on their work from the previous year. City council has also come under criticism that politicians have rejected