Tips and Tricks From HR Experts

What is Constructive Dismissal?

Darcy Michaud, CHRL - Sep 17, 2018 3:24:00 PM

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When an employer hires an employee, and terms are settled upon via the employment agreement, a written contract takes force.  Often employers don’t realize that the terms in the agreement are binding on ‘both’ parties, and as important, require mutual consent to change said terms.  This is where employers who take actions to unilaterally change the terms of employment run into trouble.  Such actions could be considered ‘constructive dismissal.’ 

A constructive dismissal is said to occur if a court finds an employer made a change to a term or condition of a person’s employment contract but has failed to provide reasonable notice of that change to the employee.  Essentially this means that if changes are made to one’s employment status that result in a significant deviation from the original job description, are detrimental to the employee, or have not included his input or approval, a basis for a claim will exist. The most prevalent triggers for constructive dismissal include these common employment agreement changes:

    • Remuneration decreases
    • Modified job content
    • Reduction in employee status or prestige
    • New geographic location
    • Humiliating or poisoned workplace environment

An employee who has been subject to constructive dismissal has essentially been terminated.  An employment agreement is in fact a contract.  Let’s say you have a contract with a vehicle company to lease a car. You unilaterally decide that you want to pay lower monthly payments. The vehicle company would rightly state you have breached the terms of the contract.  In turn, the contract would be terminated.

As is the case with any termination that is not for cause, should you constructively dismiss an employee, you would be responsible for all the statutory obligations and potential common law considerations associated with a termination.  Given the fact that the employer was the party who violated the contract, the judgements awarded to employees in cases of constructive dismissal can be rather large.

Not every change in employment will necessarily lead to a possible constructive dismissal claim. Only those that substantially modify the principal terms of a contract will warrant a closer review. Any basis for a claim isn’t simply isolated with the employee’s perception. The employer will have exhibited an identifiable decision that results in a significant employment change. In addition, the courts will be looking at how employers treat their staff. Employers are obligated to display decency and respect toward their employees. Even if remuneration hasn’t changed drastically, constructive dismissal can be proven on the basis of civility. If there is a demeaning change to a person’s work environment, that alone can be grounds for a claim. Having clearly communicated and accessible policies that encourage dignity in the workplace is a good idea.

Oddly enough, it is in the beginning of the employment relationship where the employer can take the most effective measures to protect themselves against claims of constructive dismissal.  The employment contract or arrangement is – in my opinion – the single most important piece of documentation in the life cycle of employment.  It is the one place where the employer can outline or dictate the terms and conditions for which the job is being offered and accepted.  In offering these terms and when the employee accepts, a mutually agreed accord has been struck which the employee is bound, with the terms therein being conditions of employment.

Let us use the example of an employee that might claim constructive dismissal because they suffered a significant loss in hours or was temporarily laid off.  If the employer was wise at the time of hire, they may have included wording in the agreement to the affect … “The Employer reserves the right to change or reduce the work hours of the employee and/or temporarily layoff the employee as per the terms of the Employment Standards Act, as operationally required.  This action will not construe constrictive dismissal.”  In such a case, the employer may take these operationally necessary actions without fear of consequence or a claim of constructive dismissal from the employee.

The liability and consequences that may arise from an ill-crafted employment agreement or an operational decision that leads to a claim of constructive dismissal provides for one evident conclusion …. Employers need professional and on-going HR services to ensure they effectively and safely manage the hiring and terminations of employees.




Topics: Termination, HR Compliance, HR Law, Industrial Staffing