Is it legal to make it mandatory that an employee take part in the company benefit plan (and has to pay his portion of the premium)?
Question: Is it legal to make it mandatory that an employee take part in the company benefit plan (and has to pay his portion of the premium)?
Answer: Like any contract, employment contracts can be constructed according to whatever lawful terms the parties see fit to include. For the unionized workplace, the terms and conditions are those as negotiated with the representative trade union and contained in a collective bargaining agreement. It would seem from your question, however, that you are dealing with a non-union workplace and I will frame my response based on that assumption. At the time of hiring, the employer can include a mandatory benefit plan participation clause, since the employee has the choice of accepting or rejecting the contract containing this term. However, once the contract is formed, any significant unilateral changes could be regarded as a constructive dismissal. In the employment law context, this means that if an employer decides to change the terms of employment unilaterally in a way that is significant, the result could be a constructive dismissal of the employee, entitling him to the same notice and damages as if he had been wrongfully dismissed.
The key question is whether requiring existing employees to take part in (and pay for) a benefits package would be seen as changing a fundamental term of the employment contract. By making participation mandatory, the employer is arguably reducing remuneration to the employee, since he no longer has access to the money he is paying into the benefit plan.
Previous employment law decisions have addressed whether a net loss to the employee, of either benefits or wages, has been significant enough to be considered a repudiation of the existing contract. Arguably, the employee in the situation at hand, instead, faces a zero-sum situation, where the money is being replaced by benefits, albeit benefits he may not want.
Remuneration is one of the most vital terms of an employment contract, such that unilateral changes in salary will usually constitute a constructive dismissal. There have been cases in which a small decrease in salary was found not to be a fundamental breach of the employment contract, such as in Poole v. Tomenson Saunders Whitehead Ltd. (1987), 18 C.C.E.L. 238 (B.C.C.A.), where non-payment of part of an annual bonus was not sufficient to be considered constructive dismissal. However, this outcome is unusual, and if any term could be said to be most fundamental to the contract, it is the agreed wage structure.
In researching your question, I did not find any case that was precisely on point. However, it is apparent from the basic principles that apply in this area, that a unilaterally introduced requirement that all employees must participate in a benefits program could be seen as constituting constructive dismissal for existing employees. One option you may wish to consider would be to introduce the new requirement for existing employees after providing them with a period of reasonable notice of the change to their employment contracts. As mentioned above, the mandatory program could be introduced for new hires immediately. Thereafter, for those existing employees who objected to the requirement, it could be phased in by providing them with reasonable notice of the change. The period of notice will vary according to the specific employment circumstances of each employee. Obviously, however, if the employees consent to the change, it could be implemented for existing employees immediately as well.
Brian Kenny is a partner with MacPherson Leslie and Tyerman LLP in Regina. He can be reached at (306) 347-8421 or [email protected].
Answer: Like any contract, employment contracts can be constructed according to whatever lawful terms the parties see fit to include. For the unionized workplace, the terms and conditions are those as negotiated with the representative trade union and contained in a collective bargaining agreement. It would seem from your question, however, that you are dealing with a non-union workplace and I will frame my response based on that assumption. At the time of hiring, the employer can include a mandatory benefit plan participation clause, since the employee has the choice of accepting or rejecting the contract containing this term. However, once the contract is formed, any significant unilateral changes could be regarded as a constructive dismissal. In the employment law context, this means that if an employer decides to change the terms of employment unilaterally in a way that is significant, the result could be a constructive dismissal of the employee, entitling him to the same notice and damages as if he had been wrongfully dismissed.
The key question is whether requiring existing employees to take part in (and pay for) a benefits package would be seen as changing a fundamental term of the employment contract. By making participation mandatory, the employer is arguably reducing remuneration to the employee, since he no longer has access to the money he is paying into the benefit plan.
Previous employment law decisions have addressed whether a net loss to the employee, of either benefits or wages, has been significant enough to be considered a repudiation of the existing contract. Arguably, the employee in the situation at hand, instead, faces a zero-sum situation, where the money is being replaced by benefits, albeit benefits he may not want.
Remuneration is one of the most vital terms of an employment contract, such that unilateral changes in salary will usually constitute a constructive dismissal. There have been cases in which a small decrease in salary was found not to be a fundamental breach of the employment contract, such as in Poole v. Tomenson Saunders Whitehead Ltd. (1987), 18 C.C.E.L. 238 (B.C.C.A.), where non-payment of part of an annual bonus was not sufficient to be considered constructive dismissal. However, this outcome is unusual, and if any term could be said to be most fundamental to the contract, it is the agreed wage structure.
In researching your question, I did not find any case that was precisely on point. However, it is apparent from the basic principles that apply in this area, that a unilaterally introduced requirement that all employees must participate in a benefits program could be seen as constituting constructive dismissal for existing employees. One option you may wish to consider would be to introduce the new requirement for existing employees after providing them with a period of reasonable notice of the change to their employment contracts. As mentioned above, the mandatory program could be introduced for new hires immediately. Thereafter, for those existing employees who objected to the requirement, it could be phased in by providing them with reasonable notice of the change. The period of notice will vary according to the specific employment circumstances of each employee. Obviously, however, if the employees consent to the change, it could be implemented for existing employees immediately as well.
Brian Kenny is a partner with MacPherson Leslie and Tyerman LLP in Regina. He can be reached at (306) 347-8421 or [email protected].
