Changing a benefits plan

Requiring notice for significant changes
By Stuart Rudner
|Canadian Employment Law Today|Last Updated: 03/06/2013

Question: What kind of notice does an employer have to give when making significant changes to a benefit, such as a pension plan or paramedical coverage?

Answer: The answer to this question will depend largely upon the contractual terms of the employment relationship, as well as the policies in place. At common law, a substantial change to a fundamental term of the employment contract constitutes constructive dismissal. This can take the form of a decrease in compensation, a demotion, a transfer to a different geographical location, or any other type of change to a fundamental term of the relationship. It most certainly would include benefits such as pension plan or paramedical coverage. As a result — and based upon the wording of the question we assume that it will be “significant” or substantial change — then at common law such a change would constitute constructive dismissal.

If that is the case, there are a few options available to the employer. One would be to negotiate the change by offering some form of consideration in exchange for the employee’s acceptance of the new benefits. This consideration could take the form of a one-time bonus, a promotion or increase in salary, or anything else of value. The reason consideration is required is that in order to have a legally enforceable contract, there must be “consideration” — or benefits — flowing to both parties. Even if the employee was to “sign off” on the changes by accepting them, this would not necessarily be enforceable unless she was obtaining something in exchange for her agreement to do so.