What is Constructive Dismissal and Why is it Important?

What is constructive dismissal?

Constructive dismissal is form of dismissal that occurs when there is a change to a fundamental term of the employment contract. The employer does not expressly tell the employee that they are being terminated – but by virtue of the fundamental change the employee may be entitled to damages and compensation.

Constructive dismissal arises in two situations:

1. Where an employer substantially alters an important or essential term of the employment contract unilaterally and, as a result, breaches the employment contract; or
2. Where the employee experiences harassment, bullying or another form of abuse from their employer that makes the work conditions unbearable and which no reasonable person should be subjected to.

To be successful in a constructive dismissal claim, the employee must show that a reasonable person in the circumstances would have reached the conclusion that the employer no longer intended to honour the terms of the employment contract with the employee.

Learn more about constructive dismissal.

Examples of Constructive Dismissal

• A major change in an employee’s work hours and/or location
• A change to the employee’s compensation or compensation structure
• A demotion or change in job title or responsibilities
• Additional work being asked of an employee without compensating the employee for the additional duties
• An intolerable workplace conducive to bullying, harassment, abuse, discrimination

What is an employee entitled to if constructively dismissed?

Where an employee has been constructively dismissed, they are entitled to damages in lieu of the reasonable notice. Damages consist of the employee’s regular pay, loss of bonuses, vacation pay, pension benefits, and other benefits that the employee received during their employment.

Notice periods range from 0 – 24 months depending on factors such as length of employment, position, and age.

An employee may also be entitled to an award of aggravated or punitive damages in cases where the employee was subjected to an intolerable work environment that caused mental distress. Similarly, if an employee was discriminated against contrary to the Human Rights Code, the employee may be entitled to damages for injury to their dignity, feelings, and self-respect. This claim would be in addition to a constructive dismissal claim.

What is working notice and when is it required?

What should an employee do?

If an employer is making unilateral changes to an employment contract, it is imperative that employees consider taking the following steps:

• Communicating with their employer directly and voicing their disagreement with the changes.
• Making sure communication is in writing to avoid further disagreement.
• Asking that an employer provide written clarification of changes.
• Seeking the advice of lawyer. Time is important and waiting too long before taking steps may damage your case. If the terms of your employment are changed and you continue to work under the new terms, you may be considered to have condoned and/or agreed to the changes

What should you do if your employer is trying to make you quit your job?

How can a business owner avoid a constructive dismissal claim?

Communication is key when trying to avoid constructive dismissal claims. Some practice tips to avoid these types of claims are as follows:

• Ensuring that your employees are in the know about any changes that may affect their job.
• Balancing the employee’s rights and expectations with the employer’s right to make reasonable changes to the workplace.
• Providing sufficient notice to employees when making a major change to an employee’s role.
• Making any changes in writing, such that the employee is in a position to agree to and sign off on the change.

Whether you are an employee and think you have been constructively dismissed or whether you are an employer looking to make changes to an employee’s employment contract, it is imperative that you contact a lawyer as soon as possible. Our employment lawyer, Natasha Nair, would be pleased to advise you on constructive dismissal or any other employment law questions.

© Linley Welwood LLP. The contents of this article do not constitute legal advice. Readers should seek legal advice in relation to their own specific circumstances.