Sep 21, 2014

Repeated failure to pay employee on time amounted to constructive dismissal

Ma v VE Collective Inc, 2014 CanLII 39566 (ON LRB)

The Ontario Labour Relations Board decided that an employee was in fact constructively dismissed and entitled to termination pay when the employer repeatedly failed to pay the employee on her regular pay day.

Not only was this a breach of section 11 of the Employment Standards Act, but it also constituted constructive dismissal. The main factors considered were the length of time the wages remained outstanding and the number of times the payment of wages were delayed.

Facts of the case

The employee was an engineer with the employer. She earned a salary and was paid on a biweekly basis.

The employee's pay day was supposed to be every other Friday via direct deposit.

The employer was late paying the employee on seven occasions leading up to the end of the employment relationship. The patterns were irregular - sometimes the payments would only be a couple of days late, but the last two times they were up to seven days late.

The employer never offered an explanation. Moreover, the employer made comments to the employee that gave the impression that things would not be improving and a regular payment schedule was not going to happen any time in the near future. The employer said that production did not match payroll, and invited the employee to provide ideas on how to change this.

After resigning, the employee launched an action claiming that she had been constructively dismissed due to this repetitive failure to pay her on time.

Decision

The board found the following:

The employer breached section 11(1) of the Act. It was clearly required that the employer had to establish a recurring pay period and pay day, and then pay all the wages earned during this time no later than the pay day for that period. This did not happen on seven of the last eight occasions before the end of the relationship. This was a breach of the provision.

The employer constructively dismissed the employee. There was no question that the employer repetitively failed to pay the employee on time. Wages constituted a fundamental term of any employment contract. Employees had to be able to receive their earned wages so they could organize payment of their own debts. The key things to examine were the length of time the wages remained outstanding and the number of times the payment of wages were delayed. In this case, the wages were supposed to be paid every other Friday. The last two payments were delayed more than usual (seven days), and there was no explanation provided by the employer. In fact, the employer provided no assurances regarding the outstanding pay when asked. Therefore, it was understandable that the employee was not particularly optimistic about when she would be paid and her ability to remain employed. The pattern of late payments created a feeling of uncertainty, and given the circumstances, this constituted a unilateral change to a fundamental term of the employment contract. The last two late payments were the final straw, and the employee resigned within a reasonable period of time after receiving a weak explanation that production did not match payroll

Consequently, the employee was entitled to termination notice. However this excluded a few expense claims she incurred because “wages” under the Act did not include expenses.

What can we take from this case?

The Ontario Employment Standards Act requires an employer to establish a recurring pay period and a recurring payday. Payment can be made by cash, cheque, or direct bank deposit. In addition, a written pay statement must be furnished to each employee on or before each payday.

As can be seen from this case, a solid pattern of irregular late payments can lead to constructive dismissal because wages constitute a fundamental part of the employment contract. The employer made things worse for itself in this case by not providing an explanation or any assurances. In fact, the employer made comments that suggested things were only going to get worse.

Employers who find themselves in a situation where a payment to employees may be late are recommended to notify employees and provide an explanation and any assurances required that it is not going to be a pattern. Communication is vital - the approach taken can make all the difference.