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Understanding Constructive Dismissal

Understanding Constructive Dismissal

Constructive dismissal is one of the most confusing areas of employment law.  Not all employer conduct is sufficient to trigger a legitimate claim for constructive dismissal and conduct that would otherwise seem innocuous may trigger a legitimate claim.

What is Constructive Dismissal?

Constructive dismissal happens when an employee resigns from their position because the employer has, without warning, materially altered the employment relationship or created such a hostile work environment that it is impossible for the employee to continue with their employment. Constructive dismissal is a position taken by an employee that their employment relationship has been so significantly changed or that the work environment is so hostile that it is impossible to continue employment. This means that the employee takes the position that they have been terminated without cause and effectively terminates their own employment. The terminated employee then must assert that the employer, having terminated their employment, must provide pay in lieu of reasonable notice. Unfortunately, this creates a situation that the employee is forced to trade its employment for a wrongful dismissal claim. If the conduct is not sufficient to support the constructive dismissal claim, then the employee is left without employment or pay in lieu of notice – certainly a gamble, except in the clearest of cases.

Clear Case of Constructive Dismissal

So, what is a clear case of constructive dismissal?  Unfortunately, there is no clear answer.

The change must be unilateral on the part of the employer, meaning that the employee was not consulted and did not agree to the change in working conditions before it was imposed upon them.

The change must also be material and significant to warrant a claim for constructive dismissal.  Small changes to the employee’s role and their responsibilities are permitted by law, however, significant changes to the role are not.  For example:

  • a reduction in pay, including salary, commissions, bonuses, benefits, etc.;
  • a demotion;
  • an employer refusing to allow or permit the employee to perform the conditions of their employment or complete the assigned tasks;
  • harassment, abusive behavior by the employer or by the employee’s superior; or
  • being given the choice of accepting a significant change in the employment relationship or being terminated.

Constructive Dismissal | Doal Shirreff Kelowna Lawers

Can an Employer Avoid Constructive Dismisal Claims?

Can an employer avoid a constructive dismissal claim in changing an employee’s duties or remuneration?

The Courts have suggested a practical approach for employers to be able to adjust and have some flexibility with regard to its employees and the need for staff coverage with changing economic and business needs, but staying within the tenants of employment law.

An employer, who wants to impose material, fundamental and significant changes to the employment relationship, can avoid claims of constructive dismissal and wrongful termination simply by providing the employee working notice of termination of their position.

Working notice, which is permitted by law, allows an employer to advise the employee that their position will be fundamentally changed or eliminated completely and provide reasonable notice that as of an effective date their employment will be terminated.  The employee would continue to work through the notice period with the knowledge that the position will be changing or eliminated as at a fixed date. The amount of working notice required depends on a number of factors, including, but not limited to:

  • whether there is a termination clause in the employee’s Employment Agreement;
  • the age of the employee;
  • the duration of the employment;
  • the seniority of the employee and whether they are management or not; and
  • the availability of alternative employment elsewhere; etc.

The Ontario Court of Appeal was the latest higher court decision on the issue of constructive dismissal.  In their decision, the Court of Appeal held that the most reasonable approach for an employer faced with the need to fundamentally change an employment relationship is to provide the employee with reasonable notice of the change and that the position will be terminated at an effective date. Then the employer should, where possible, offer the new position to the terminated employee as a means of permitting them to mitigate their damages.

This suggested approach has a two-fold effect.  It extinguishes any potential claim for wrongful termination as reasonable notice was provided to the employee and it effectively allows the employee to mitigate any further damages by accepting a new, different position.  If the employee refuses the new position they would likely be unable to claim further damages against the employer.

Scott Chambers is an Employment and Human Resources lawyer at Doak Shirreff Lawyers LLP.  Scott can be reached at [email protected] or 250-979-2527.  You can also follow Scott on Twitter at @DSEmploymentLaw and on LinkedIn.