In Johnson v Country Hills Chrysler Dodge Jeep Ram Ltd, 2026 ABKB 629, the Alberta Court of King’s Bench found that two long-service employees were constructively dismissed after their employer imposed immediate and substantial changes to both their working hours and commission compensation.
The employees were Finance and Insurance Managers whose compensation was entirely commission-based. After one manager left, the employer introduced a new memorandum that changed both the commission structure and the work schedule. The employer argued that the changes were operational and flexible, but the Court found that the memorandum was mandatory, effective immediately, and not simply a proposal or trial arrangement.
Significant Increase in Working Hours
The Court found that the employees’ average required hours increased from approximately 38 hours per week to about 50 hours per week, with some rotations reaching as high as 57 hours.
Although the employer argued that the schedule was flexible and that employees could sometimes leave early, the evidence showed that the managers were expected to be present and available during their scheduled shifts. The Court therefore rejected the characterization of the change as merely administrative or operational.
Instead, the increase in required working hours was found to be a unilateral and substantial change to an essential term of employment. On its own, the change was sufficient to support a finding of constructive dismissal.
Significant Change to Compensation
The Court also found that the new commission structure materially altered the employees’ compensation.
The employer argued that compensation arrangements had changed over the years and that it retained the ability to restructure the commission plan. The Court rejected the suggestion that previous changes gave the employer an unrestricted right to impose substantial future changes without notice.
The Court emphasized that remuneration is fundamental to the employment relationship. There was no contractual term permitting the employer to make substantive changes to the commission structure without notice, and the fact that employees had accepted earlier changes did not prevent them from objecting to a later fundamental change.
The Court also found that, even if there was some ambiguity in the earlier compensation arrangement, the employer could not simply impose its own interpretation where the surrounding circumstances had created a reasonable expectation on the part of the employees as to how commissions would be divided.
The Combined Effect: More Work for Less Favourable Compensation
The Court ultimately considered both changes together.
The employees were being required to work substantially longer hours while moving to a less favourable compensation arrangement. Both hours of work and remuneration were essential terms of employment, and both were changed unilaterally and without adequate notice.
The Court found that the changes, whether viewed separately or cumulatively, demonstrated that the employer no longer intended to be bound by the existing employment arrangement. The employees were therefore constructively dismissed.
Importantly, the decision does not mean that an employer can never change compensation or scheduling. The Court recognized that an employer may have legitimate business reasons to restructure. However, substantial changes to essential employment terms cannot necessarily be imposed immediately. Adequate notice may be required.
Briefly Continuing to Work Did Not Amount to Acceptance
The decision also provides useful guidance on condonation.
Mr. Johnson returned to work a few days after the changes were announced. The employer argued that this conduct was inconsistent with constructive dismissal. The Court disagreed.
Given his long service, the significance of the changes, and the short period of time involved, the Court found that he had not accepted or condoned the new terms. Employees are entitled to a reasonable period of time to assess a significant workplace change and decide whether to accept it.
The Result
The Court awarded Mr. Bedard, who had approximately 13 years of service, 15 months’ reasonable notice. Mr. Johnson, who had nearly 21 years of service, received 22 months’ reasonable notice. Damages were calculated using average earnings over the three years preceding dismissal, subject to mitigation.
Key Takeaway
Johnson is an important Alberta constructive dismissal decision because it reinforces that the employment bargain extends beyond title and duties. Compensation and required working hours can both be essential terms of employment.
Where an employer significantly increases an employee’s hours, reduces or materially changes compensation, or does both at once, the changes may amount to constructive dismissal if they fundamentally alter the employment relationship and are imposed without the employee’s agreement or adequate notice.
*Always seek legal advice. The above is for information purposes only.
Stephen Dugandzic received his Juris Doctor degree from the University of Alberta in 2013 and is Calgary-based. He previously practised with Bennett Jones LLP and Taylor Janis LLP before founding YYC Employment Law Group in 2018 and Evolution Legal in 2026.
FAQs
What is constructive dismissal in Alberta?
Constructive dismissal can occur where an employer makes a substantial unilateral change to an essential term of employment without the employee’s agreement. It may arise from a single serious change or from a series of changes that, taken together, show the employer no longer intends to be bound by the existing employment contract
Can increasing an employee’s hours amount to constructive dismissal?
Yes. In Johnson, the Court found that increasing the employees’ required hours from roughly 38 hours per week to about 50 hours, with some rotations reaching 57 hours, was a substantial unilateral change to an essential term of employment.
Can a change to commission or compensation amount to constructive dismissal?
Yes. The Court emphasized that remuneration is fundamental to the employment relationship. A substantial change to an employee’s commission structure, particularly where the employer has no contractual right to impose the change without notice, can support a finding of constructive dismissal.
Can an employer change hours or compensation if it has a legitimate business reason?
Potentially, but a legitimate business reason does not necessarily allow the employer to impose a fundamental change immediately. In Johnson, the Court recognized that the employer could restructure its operations, but found that adequate notice of substantial changes to compensation and working hours was required.
Does continuing to work after a major change mean the employee has accepted it?
Not necessarily. The Court found that an employee may be entitled to a reasonable period of time to assess a significant change and decide whether to accept or reject it. Mr. Johnson’s return to work a few days after the changes were announced did not amount to condonation in the circumstances.