Ask the ExpertCategory: QuestionsHow to manage offering voluntary Salary Reductions due to COVID-19?
hri_Admin Staff asked 2 years ago

We are a not-for-profit. What suggestions do you have to manage offering voluntary Salary Reduction agreements to management due to COVID-19? I don’t see this in the new Game Plan document for COVID from HRInsider.

1 Answers
Glenn Demby Staff answered 2 years ago

Yeah, voluntary wage reductions are another strategy option to temporary layoffs and can also be used in conjunction with EI Work Sharing, provided that your organization could apply for the latter. I’m guessing your employees are not unionized. So, while you can definitely negotiate for temporary wage decreases, you CAN’T IMPOSE THEM UNILATERALLY. If you do, you run the risk of constructive dismissal and potential damages for wrongful dismissal. Not saying you’d automatically be guilty of CD, but you definitely could be and open yourself to claims.
One more important thing to keep in mind is that employees must receive consideration, i.e., something of value, in return for agreeing to a salary cut. Simply keeping the job may not be enough under what lawyers call the “preexisting duty rule,” which holds that a previous contractual obligation, in this case, to hire and compensate an employee under the original contract, does not constitute consideration. Hope this helps. Glenn