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Avoid Constructive Dismissals

Avoid Constructive Dismissals

Megan Adler "flipped out" when her boss handed her a letter of reprimand. She did not deserve to be disciplined. She just wanted to be treated fairly when it came to the transfer of her accounts and compensation for her sales.

Adler loved her job selling advertising for Acme Television Network. Her territory was the Maritimes. She had a number of large accounts, some of which followed her to Acme. Her compensation included a bonus which depended on the volume of her sales. Meeting her sales numbers was no problem. She thrived.

But Acme began reassigning Adler's successful accounts to others and not replacing them. She had fewer sales, which meant less income for her.

Smithson Co. Entertainment was one of her largest accounts. Adler had handled Smithson Co. for the past 25 years and they had followed her to Acme. When Acme announced Smithson Co. was to become a national account and transferred to a Toronto sales representative, Adler became upset. She became even more upset when she learned the account had not been transferred to Toronto, as she had been told, but to her boss.

Unexpectedly, her boss informed Adler she could keep Smithson Co.. Adler promptly proceeded in two weeks to sell Smithson Co. $275,000.00 worth of advertising contracts. She also bought a new car to celebrate.

Less than three weeks later, her boss abruptly told Adler there was a change: Smithson Co. would no longer be her account and she should send all of her Smithson Co. sales to Toronto. Adler was also told she would not be paid for all the advertising she had sold to Smithson Co..

Adler did not mince her words in an email complaining to her boss' boss that she objected to the reassignment of the Smithson Co. account and the unfair treatment of her accounts and sales. She wanted to be compensated for her work on the Smithson Co. account and given a replacement account.

She was summoned to a meeting. Mullahy went to the meeting hoping the Smithson Co. issue would be resolved, but left with a reprimand for insubordination. Undone, Mulhally went on a stress leave for a week. Adler concluded continuing to work for Acme was fast becoming intolerable for her. She returned for one day to tell Acme she considered herself constructively dismissed. She sued for wrongful dismissal.

The Court concluded there had been unilateral alterations of her contract. Coupled with the unfair and callous manner in which Acme dealt with the transfer of the Smithson Co. account and bad faith dealing with Adler, Acme had repudiated the employment contract. Adler was entitled to 16 months' notice and in view of the manner of the termination she was entitled to a further four months of damages. Because of her sometimes rude and insubordinate manner, the four additional months were reduced to two months for a net award of 18 months.

Employers have the discretion to transfer customer accounts for valid business reasons. However, since Adler's remuneration was intimately connected with the assignment of accounts. Acme was manipulating Adler's overall compensation by the removal of accounts. Furthermore, Acme was callous and insensitive in dealing with Adler transferred accounts. The court found they dealt with her in bad faith.

An employer has a duty to make transfers of accounts reasonable and fair to the sales representative within the exigencies of its business and a failure to do so is a constructive dismissal.
When making changes to your employees' accounts or territories, I recommend the following:

  • Offer to compensate the employee for the lack of notice or minimize the impact of any reassignment with a replacement account or accounts;
  • Promptly answer any inquiries and provide honest and direct information to the employee about the changes.
  • Acknowledge an employee's effort to continue to work with your business needs and do the same in response.

Strike a balance between your business needs for effective and profitable sales assignments and the employee's desire to maintain or increase their compensation.

In the ideal world, this should be a win-win situation, not a dispute settled by a judge.


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Legal Disclaimer: None of the information provided herein constitutes legal advice on behalf of Monster.