Corporate change is a fact of business life, particularly in times of economic uncertainty. But, implementing changes can have employment implications, notably claims of constructive dismissal (at common law or statute).
Where the changes are sweeping across the organization or impact large groups, there is the risk of class proceedings. Such was the case in Kafka v. Allstate Insurance Company of Canada decided earlier this week which involved a motion for certification of a proposed class action pursuant to s. 5 of the Class Proceedings Act, 1992.
The Court summarized the context of the motion as follows:
On July 24, 2007, Allstate issued a general announcement letter to all active Agents, advising that effective September 1, 2009 a revised product distribution model and agent compensation system would be implemented (the “New Model”). The New Model was phased in from September 1, 2007 through 2009.
The plaintiffs allege that the New Model unilaterally changed fundamental terms of their employment contracts and that these changes constitute constructive dismissal. They resigned from Allstate and commenced this proposed class action seeking termination and/or severance pay pursuant to the Employment Standards Act, 2002 ( the “ESA”).
At the heart of this certification motion is a debate about whether an action alleging constructive dismissal is suitable for certification. The plaintiffs argue that the question of whether Allstate constructively dismissed the Agents can be determined by looking at the “big picture”. Specifically, did the systemic changes that the New Model introduced result in a constructive dismissal of all Agents? It is Allstate’s position that the law of constructive dismissal requires an individualized inquiry and in this case the impact of the New Model on each agent depends upon a myriad of factors.
Section 5(1) of the CPA sets out the criteria for the certification of a class proceeding. The language is mandatory. The court is required to certify the action as a class proceeding where the following five-part test for certification is met:
(a) the pleadings or the notice of application discloses a cause of action;
(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
(c) the claims or defences of the class members raise common issues;
(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and
(e) there is a representative plaintiff or defendant who,
(i) would fairly and adequately represent the interests of the class,
(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and
(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.
Winkler J. (now Chief Justice) held that that "the core of a class proceeding is 'the element of commonality' and, according to the Court in Kafka, "There must be commonality in the actual wrong that is alleged against the defendant and some evidence to support this".
After reviewing the law with respect to constructive dismissal under the ESA (and at common law), setting out the various issues (ten of them), and recognizing that "the common issues criterion is not a high legal hurdle" the Court held that this was not a proper case for certification.
Again, changes to terms and conditions of employment can give rise to a variety of claims. This case goes a long way in reviewing whether these types of claims are "right" for class certification and the appropriate analysis to be undertaken in deciding whether to certify a class.
