My employer is reducing everyone’s wages. Do I have any recourse?

This blog was originally published in the Globe & Mail on November 19, 2024

I work at a daycare. Two years ago, the owner made a big show of increasing early childhood educator wages by a few dollars an hour so that everyone would be earning a living wage. Now I just received notice that due to changes in funding amounts, they are reversing the increase. They say that the lower wages are still on par with market rates for ECEs. Is this legal? What recourse do I have if we want to keep the higher wage?

This is the dark side of an inadequately funded $10-a-day daycare in Ontario; it frequently comes on the backs of childcare workers who are expected to work for substandard wages.

Unfortunately, as a non-unionized employee, your options for retaining higher wages are limited. In Ontario, wages are typically set through agreements negotiated between employers and employees based on labour market conditions. Employers are generally required to meet the minimum wage—currently $17.20 per hour—but are not obligated to sustain wages above this level. Neither the courts nor Employment Standards Officers have the authority to require employers to maintain higher pay, regardless of perceived fairness.

That said, there are potential avenues for recourse. Employers can make minor adjustments to employment terms, but significant changes, like a large wage reduction, require employee consent. Absent consent, a substantial wage cut could be considered constructive dismissal, allowing you to treat your employment as terminated and seek termination pay and severance. Due to the complexity of constructive dismissal claims, consulting an employment lawyer can help clarify any potential benefits of this option.

The determination of a "substantial" wage cut is case-specific, though a reduction of 10% or more is typically viewed as substantial. For lower-wage employees, even smaller reductions can be significant if they affect the ability to meet basic expenses.

Additionally, you and your colleagues may benefit from requesting wage reinstatement in writing, stating that you do not acquiesce to the unilateral change to the terms of your employment agreement and are working under protest. This shows non-acceptance of the wage cut and could strengthen any future dismissal claim. Moreover, an employer is more likely to respond positively to a larger group of employees. In this vein, you may want to talk to your colleagues about unionizing. Unionized workers are generally able to bargain for higher wages and better protections from arbitrary wage decreases.

The above is provided as general information only. Questions related to terms of employment and constructive dismissal may involve complex legal issues. Contact us today if you would like to consult with our lawyers.