In the evolving landscape of Canadian employment law, constructive dismissal is a critical concept every employer must understand. While most employers are familiar with wrongful termination, fewer fully grasp how actions — even those not intended to terminate an employee — may result in a legal claim of constructive dismissal.
This comprehensive guide will explain what constructive dismissal is, how it occurs, how employers can avoid it, and what to do if a claim arises.
What Is Constructive Dismissal?
Constructive dismissal occurs when an employer makes a significant change to an employee’s job or work environment that effectively forces the employee to resign. Although the employer may not have explicitly terminated the worker, the law may treat the resignation as a termination due to the employer’s conduct.
In essence, the employee quits, but the courts may view this as an involuntary resignation caused by the employer’s breach of the employment contract.
Key Elements of Constructive Dismissal:
- A fundamental change to the employment terms (e.g., salary, job duties, location).
- The change is made unilaterally, without the employee’s agreement.
- The change is not reasonably foreseeable or part of the original contract.
- The employee resigns due to the change within a reasonable time.
Common Examples of Constructive Dismissal
Employers might unintentionally trigger constructive dismissal by making the following types of changes without consent:
- Demotion or reduction in title or responsibilities
- Significant pay cuts or removal of benefits
- Relocation of the employee to a different city without agreement
- Reduction in work hours or making shifts unbearable
- Creating a toxic or hostile work environment
- Changing the reporting structure or reassigning to a lower-ranking supervisor
- Withholding pay or frequent late payments
While not every change amounts to constructive dismissal, the court examines whether the employer’s actions fundamentally altered the employment relationship.
Legal Framework in Canada
In Canada, constructive dismissal claims are governed by common law and provincial employment standards legislation. Courts assess whether the employer breached an express or implied term of the employment agreement, thus justifying the employee’s decision to resign.
Employees who succeed in proving constructive dismissal are entitled to the same remedies as if they were wrongfully dismissed. These may include reasonable notice, severance pay, and possibly damages for bad faith conduct if applicable.
How to Avoid Constructive Dismissal Claims
1. Maintain Open Communication
Before implementing any major changes, communicate clearly with the affected employee. Explain the rationale, ask for input, and offer time to consider the changes. In many cases, open dialogue prevents misunderstandings that lead to legal action.
2. Obtain Written Consent
If changes to an employee’s role, compensation, or schedule are necessary, always obtain written agreement. This serves as evidence that the employee voluntarily accepted the new terms and avoids future claims.
3. Update Employment Contracts
Employment contracts should include clauses allowing for reasonable changes to roles or responsibilities. A well-drafted employment agreement may give you more flexibility in managing your workforce.
4. Avoid Sudden or Unilateral Changes
Major changes made without warning or input are more likely to be viewed as constructive dismissal. Where possible, phase changes gradually and provide justification.
5. Document Everything
Keep detailed records of communications, meetings, and any consent provided. This documentation can be critical in defending against a future claim.
What Happens When a Constructive Dismissal Claim Is Filed?
If an employee believes they’ve been constructively dismissed, they can file a legal claim or human rights complaint, depending on the nature of the issue.
Steps in a Constructive Dismissal Case:
- The employee resigns, citing a fundamental change or hostile work environment.
- The employee files a claim for wrongful dismissal or severance.
- Courts review the facts, focusing on whether a reasonable person would consider the employment contract to have been breached.
- If successful, the employee receives compensation, typically based on length of service, role, and availability of similar employment.
The financial implications can be significant — especially if the employee had long service or held a senior position.
What Employers Should Do If Accused of Constructive Dismissal
If you receive notice of a claim or a resignation letter alleging constructive dismissal, take the following steps:
Review the Circumstances Carefully
Examine the changes made to the employee’s role and whether they could reasonably be seen as fundamental. Consider if proper procedures were followed and whether the employee consented.
Seek Legal Counsel
Speak with an employment lawyer to assess your risks and determine your next steps. Having an experienced professional on your side is critical for both negotiation and litigation. If you’re in Ontario, you may want to consult a top-rated employment lawyer Toronto firms recommend for defending employer rights.
Attempt Settlement
Litigation is costly and time-consuming. Where possible, consider a settlement or mediation to resolve the matter amicably and avoid damage to your reputation.
Constructive Dismissal vs. Wrongful Dismissal
While the two terms are often used interchangeably, they have different implications:
- Constructive dismissal involves a resignation prompted by significant workplace changes.
- Wrongful dismissal refers to an actual termination that violates the terms of the employment contract or fails to provide proper notice.
Both can result in legal claims, but the burden of proof in a constructive dismissal case lies with the employee to demonstrate that a breach occurred.
The Role of Human Resources
HR professionals are the front line in preventing constructive dismissal claims. A proactive HR team can:
- Monitor workplace changes and employee morale
- Ensure consistent application of company policies
- Facilitate conversations between management and staff
- Mediate disputes before they escalate
By prioritizing fairness and communication, HR can help minimize the risk of constructive dismissal situations.
Conclusion
Constructive dismissal is a serious legal issue that employers in Canada must be aware of. It can arise from unintended actions and lead to costly legal consequences if not managed properly.
The key to prevention is communication, documentation, and fairness. Employers should seek consent for major changes, document all interactions, and consult legal experts when making difficult decisions that could affect employment conditions.
If you are an employer facing a potential constructive dismissal claim, don’t delay in getting proper legal advice. Addressing the issue early can save your company time, money, and reputation.
