If you work in sales, your territory is not just a map on the wall. It is the foundation of your income. It shapes the clients you build relationships with, the commissions you earn, and the career trajectory you are on. So what happens when your employer decides, without your agreement, you may be wondering: can my employer change my sales territory? Before looking at territory cases, it helps to understand what constructive dismissal is and how courts assess it.
In Alberta and across Canada, a unilateral and substantial change to an employee’s sales territory can amount to constructive dismissal, entitling the employee to compensation as though they had been fired. But the law is nuanced, and not every territory adjustment will cross that line. Understanding where the line is can make all the difference.
If your employer has changed your sales territory, you can connect with a Calgary constructive dismissal lawyer at Cashion Legal for clarity, strategy, and peace of mind.
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What is Constructive Dismissal?
Constructive dismissal occurs when an employer unilaterally makes a fundamental change to an essential term of the employment contract, effectively forcing the employee out without formally terminating them. The key question is whether a reasonable person in the employee’s position would have felt that the essential terms of the contract were being substantially changed.
The change does not have to be a single dramatic act. Courts have recognized that a series of smaller changes, taken together, can cumulatively rise to the level of a fundamental breach.
The Sales Territory Cases: Three Very Different Outcomes
Three cases involving commissioned salespeople and territory changes illustrate how courts analyze this issue, and why the facts matter so much.
Case #1: Contract Language as a Shield, and Its Limits
In Churchill v. Stockgroup Media Inc., 2008 BCSC 578, the employer made changes to both the employee’s commission structure and, later, her sales territory.
The commission restructuring was upheld. The original employment agreement expressly reserved the employer’s right to change compensation plans at any time. Because the employer acted within the terms of the contract, and made adjustments in response to the employee’s concerns, there was no constructive dismissal on that issue.
The territory realignment in was a different matter. The employee had been covering Ontario, the most lucrative advertising market in the country. The employer removed Ontario from her territory entirely. The employer tried to rely on a provision introduced in the June 2005 compensation document purporting to give it the right to realign territories at will. The Court, however, found that this provision had been introduced without fresh consideration and therefore was never validly incorporated into the employment contract. Because the employer had no contractual basis to impose the territory change, the Court found constructive dismissal had occurred.
There was a catch: the employee had continued working and raising concerns without ever clearly communicating to the employer that she would only remain if the territory was restored. The Court found she had not properly elected to treat the territorial change as a repudiation of her contract. What ultimately constituted the dismissal was the subsequent imposition of a probation plan, which lacked any legitimate basis. The case is a reminder that even where there is no such provision, an employee who continues working without clearly reserving their rights may lose the ability to later claim constructive dismissal based on that event.
Case #2: A Campaign of Cumulative Changes
In Ahlberg v. O & K Orenstein & Koppel Inc., 2001 ABQB 856, the Alberta Court of Queen’s Bench found constructive dismissal based on a combination of events. The employee had worked as a mining equipment sales manager in western Canada for 17 years, earning commissions on complex, multi-million dollar sales. Over a period of about two years, the employer made a series of changes: it stripped away a substantial portion of the employee’s sales territory when a new salesperson was hired; it removed the employee as project manager from several major prospects he had been cultivating, including a $10 million excavator sale; it issued a unilateral and largely unfair performance appraisal, the first in 16 years of service; it reduced commission rates; and it placed the employee on what amounted to a six-month probation period with a threat of termination.
The Court found the cumulative impact of these changes was a significant, serious, and fundamental breach of the employment contract. The employee was constructively dismissed, and awarded damages.
Case #3: The Change That Did Not Cross the Line
In Snelling v. Tenneco Canada Inc., 1992 CanLII 1015 (BC SC), a commissioned equipment salesman had his territory reorganized by new management. His old territory included Surrey and Langley; his new territory substituted Vancouver, Richmond, and various local governments. The annual incentive plan agreements he had signed expressly gave the employer the right to change sales areas at any time.
The employee resisted the change, refused to actively work the new territory, made threats against management, and ultimately walked off the job. He argued the territorial change would dramatically reduce his income, pointing to the earnings of the replacement salesman hired after he left.
The Court rejected the constructive dismissal claim. The employer’s reorganization was found to be a legitimate management decision aimed at improving sales performance and deploying staff according to their strengths. The evidence did not establish that the income impact would be as severe as the employee anticipated. The replacement salesman’s lower earnings were explained by factors that had nothing to do with the territory itself. The employer had not acted unreasonably in exercising its contractual right to reassign sales areas, and had not intended to repudiate the employment contract.
What These Cases Tell Us About Constructive Dismissal
Taken together, these three cases point to several principles that Alberta employees in sales roles should understand:
- Whether the employment contract expressly permits territory changes matters enormously. An employer who has reserved that right contractually is in a much stronger position, provided it exercises that right reasonably and in good faith.
- Even where there is a contractual right to reassign territory, it is not unlimited. A change that is so unreasonably prejudicial to a commissioned employee’s earning potential may still be found to repudiate the contract.
- Cumulative changes matter. Territory reassignment does not exist in isolation. Courts look at the full picture, including changes to responsibilities, commission structures, performance reviews, improper imposition of a performance improvement plan, and management conduct.
- An employee who continues working without clearly communicating that they reject the change may lose the ability to rely on it later. Timing and the manner in which an employee responds matters.
- Bad faith conduct by the employer, while not required to establish constructive dismissal, can result in damages beyond normal severance.
Can My Employer Change My Sales Territory: the Bottom Line
If your employer has significantly changed your sales territory, particularly in circumstances that will meaningfully reduce your commission income, you should get legal advice promptly. The window for acting on constructive dismissal is not unlimited, and the steps you take (or fail to take) in the weeks following a territorial change can affect your rights significantly.
At Cashion Legal, we help employed Albertans understand what they are owed and how to protect their interests. Whether you are a salesperson whose territory has been gutted, a commissioned employee facing a restructured compensation plan, or an employer trying to make legitimate business changes while managing legal risk, our Calgary employment lawyers can help. It’s easy, just contact us today.