End to big bonuses was constructive dismissal: Court

Regular practice of giving foreman bonuses for each construction project he worked on was halted after economic downturn
|employmentlawtoday.com|Last Updated: 08/10/2012

A British Columbia company’s removal of large bonuses paid to a foreman on construction projects after the economic downturn amounted to constructive dismissal, the British Columbia Supreme Court has ruled.

James Piron, 44, was a masonry foreman for Burnaby, B.C.-based Dominion Masonry. A few years after his hiring, he became a foreman and his salary was supplemented by bonuses which varied in size according to the size of the projects he worked on. Usually the bonuses were paid near the end of the year, but sometimes they were paid at other times of the year. From 2005 to 2007, Piron’s bonuses ranged from $10,000 to as high as $20,000. In 2008 and 2009, he worked on larger projects and received bonuses of $90,000 and $50,000, respectively.

In 2010, Dominion was faced with much smaller projects due to the economic downturn. It reduced the hourly wages of some workers and the bonuses. Piron didn’t agree with the reduction in bonuses and proposed the company form a division that focuses on smaller projects, with Piron heading it. After some discussion, Dominion declined to pursue the proposal.

Relations deteriorated and Piron demanded a resolution to his role and the payment of his bonuses before he started on his next project. Dominion responded by saying Piron could continue to work for the company for his regular wages but no bonuses. Piron then sued for constructive dismissal, claiming Dominion breached his employment contract by “repudiation of the previous system of payment of bonuses advanced in recognition of a foreman’s abilities and the complexity of the project he was to supervise.”

Dominion argued the bonuses were discretionary and negotiated for each individual project once the project was confirmed. In addition, after the economic downturn, projects were smaller and resources were harder to come by, so payment of such large bonuses couldn’t be paid out as they were before, said Dominion.

The court found the bonuses had become a significant part of Piron’s compensation and were paid to him every year. They were not completely discretionary, either, as they seemed to reflect the importance of a project and “to satisfy the senior employees so they were content to continue in their employment,” said the court.

Though Dominion felt the economic downturn gave it the right to change its bonus system unilaterally, this was not the case, said the court.

“Economic circumstances can lead to a substantial change to an employment contract, but the process is through negotiation, not unilateral imposition of lower compensation,” said the court.

The court found negotiating a higher amount of pay for each project through bonuses was “a significant feature” of Piron’s employment and a reflection of his status in the company. When Dominion couldn’t reach an agreement on lower bonuses in 2010, its refusal to continue discussions and implementation of compensation only through his regular wage returned Piron “to essentially the same position he occupied soon after he started work for the company” 19 years earlier.

The court ruled that Dominion unilaterally changed Piron’s compensation and therefore changed his terms of employment. Due to the hostility that developed between Dominion and Piron, the court found reinstatement wasn’t possible and ordered Dominion to pay Piron 15 months’ severance, equal to $106,250.

For more information see:

·Piron v. Dominion Masonry Ltd., 2012 CarswellBC 2183 (B.C. S.C.).

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