The corporate landscape is constantly evolving and Ontario businesses are not immune to the need for change. Workplace restructuring can be necessary to ensure that businesses remain competitive and adapt to market shifts. However, restructuring can also be stressful and uncertain for employees, giving rise to potential legal claims from affected employees.

This blog will explore workplace restructuring and common reasons for reorganization. It will also consider potential claims employers may face from employees and provide practical tips to help employers mitigate their risk through proper planning and communication.

Defining Workplace Reorganization

Workplace restructuring (or workplace reorganization) refers to the process of reorganizing a company’s operations to improve efficiency, adapt to changing circumstances, or achieve specific goals. It also refers to the process of re-evaluating the business’ employment structure at a closer level, which involves reviewing workplace policies, employment contracts, and staffing levels. Accordingly, workplace reorganization can create or eliminate specific jobs or departments within the company.

Workplace restructuring is a broad term used to encompass a variety of changes, including:

• Changes to a management structure to create new leadership roles or centralize decision-making;
• Downsizing through layoffs or early retirement programs;
• Merger and acquisition restructuring to streamline operations and eliminate redundancies; and
• Consolidation of departments to combine personnel or functions to improve efficiency and reduce overlapping tasks.

In essence, a workplace restructure or reorganization occurs when a business makes strategic adjustments that will impact its operations.

Common Reasons for Workplace Restructuring

The driving forces behind a workplace reorganization can vary, but some common reasons can include, but are not limited to:

• Mergers or acquisitions: After a merger or acquisition, the new controlling company may need to make critical labour decisions to address the business’ needs regarding costs, efficiency, and market power.
• Change to business strategy: A shift in business goals or target marking may necessitate changes in personnel and skill sets.
• Economic downturn: A reduction in revenue may require a business to assess various cost-cutting measures, such as workforce reductions.
• Changes to the competitive landscape: Technological advances and other innovations can quickly disrupt industries, and as local and global economies evolve, businesses may need to make changes to remain relevant and profitable.

Identifying Risk During a Workplace Reorganization

Workplace restructuring and related processes and decisions can potentially give rise to possible claims from affected employees. While employers have the right to restructure their operations, this right is not absolute, as employees also have rights.

Potential employee claims that might arise from a restructuring can include:

• Wrongful Dismissal: If an employee feels their termination was unjust or adequate notice (or pay in lieu thereof) was not provided, they might bring a wrongful dismissal claim.
• Constructive Dismissal: This arises when an employer unilaterally makes significant changes to an employee’s contract of employment or working conditions, making it unreasonable for them to continue working. Some common causes of constructive dismissal claims include forcing employees to relocate, amending their pay structure, adding additional responsibilities to roles without providing extra compensation, or substantially changing their job description. In such cases, the employee might claim they were forced to resign and seek compensation.
• Human Rights Claims: As outlined in the Human Rights Code, workforce decisions cannot be based on discriminatory grounds like race, gender, age, or disability when restructuring. If employees feel their selection for termination or change in role was discriminatory, they could file a human rights complaint.
• Damages for Breach of Employment Contract: If an employer violates the terms of an employee’s contract during the restructuring process, a breach of contract claim might arise. For example, an employee may commence a claim if the employer fails to provide or pay out benefits, vacation pay, leave entitlements, or other employee rights under applicable provincial or federal employment legislation (such as the Ontario Employment Standards Act).

How Can Liability Be Mitigated?

Employers and business owners may employ various strategies to mitigate risk and legal liability during a workplace restructuring. Layoffs and job terminations must be appropriately handled and must be in compliance with all applicable employment laws and standards. If the specified processes are not followed, they may give rise to costly wrongful dismissal claims. Even altering an employee’s job duties or employment contract terms can lead to constructive dismissal claims.

If mishandled, termination letters and severance agreements (including any restrictive covenants, such as non-compete or non-solicitation clauses) can also give rise to litigation. However, by working with a knowledgeable employment lawyer, you can ensure that each step of the reorganization process is handled correctly so employers can mitigate potential legal and financial pitfalls.

As such, employers need to take proactive steps, such as:

• Conducting thorough planning and maintaining comprehensive documentation regarding a restructuring plan, legal compliance and employee performance;
• Providing employees with open and effective communication, from the announcement of any restructuring decision and the rationale behind the changes;
• Maintaining transparency by advising of the potential impact on staff and the timeline for the process to avoid misinformation and address employee concerns; and
• Ensuring the restructuring process is fair, consistent, and follows established policies.

How Can an Employment Lawyer Help During a Workplace Restructure or Reorganization?

Having an experienced employment lawyer guide your business through a reorganization or restructuring is critical to ensuring a smooth transition, limiting liability, and avoiding unnecessary costs and litigation. A skilled lawyer will ensure that employee restructuring, layoffs, and terminations are handled in compliance with all legislative requirements to minimize the risk of lawsuits and employment standards claims.

Your employment lawyer may assist with various aspects of the restructuring or reorganization process, including, but not limited to:

• Drafting and reviewing termination letters and other communications to employees;
• Drafting and reviewing severance offers and agreements to ensure legal compliance;
• Preparing non-disclosure agreements and other restrictive contracts upon termination;
• Developing and assessing restructuring plans; and
• Negotiating disputes with employees and their legal counsel to reach timely and cost-effective resolutions.

Contact the Employment Lawyers at Willis Business Law for Assistance With Workplace Restructuring and Reorganization

At Willis Business Law, our skilled employment lawyers utilize their extensive experience to help business owners and employers seamlessly navigate workplace restructuring and reorganization. From preparing a restructuring plan, to drafting employee communications, and reviewing severance packages, our experienced employment law team regularly advises and guides clients through these complex processes. We will help you identify and mitigate risk, ensure that your business remains compliant with statutory requirements, and help you proactively minimize the chances of employee claims. To speak with a member of our team regarding your workplace reorganization concerns, contact us online or call us at 519-945-5470.