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Demystifying Constructive Dismissal
Written by: Kyle J. Allen, Associate, Brownlee LLP
Change in the workplace is a constant presence. Restructuring and reorganizing are human resource realities of the current times. What is constructive dismissal? What are the consequences of constructive dismissal, and how can you avoid hidden traps and risk in this area when implementing changes within your workplace?
Constructive Dismissal Basics
Once a contract of employment has been formed, whether this be in writing, verbal or implied, neither party has the right to change a significant term of the contract, unless both parties agree to the change. In certain circumstances, unilateral changes by an employer to an employee's position, job responsibilities, compensation package, or other terms, can amount to a potential constructive dismissal. The issue is whether the changes that have been made to the employment relationship are so significant as to amount to a breach of a fundamental term and condition of the employment contract. If a breach of a fundamental term has occurred, this gives rise to a potential constructive dismissal claim. Also, where the employer, through its actions (or lack thereof), has created a situation which makes it untenable for an employee to continue, in certain circumstances, an employee may argue that the employer’s conduct constitutes a constructive dismissal.
The damages a Court would award an employee in a successful action for constructive dismissal are equivalent to the damages the employee would receive had the employee been wrongfully dismissed.
To determine whether a unilateral change gives rise to a potential constructive dismissal, the Courts will consider three general issues:
- What are the terms of the employment contract?
- Has there been a breach of one, or more, of those terms?
- If there has been a breach, is it a fundamental breach?
For the proactive employer, the important question is: How can an employer implement a fundamental change to an employee’s conditions of employment without risking a lawsuit for constructive dismissal? Generally, there are two methods to accomplish such a change in a legally acceptable manner:
- “Reasonable” Notice
No matter how dramatic the desired change to the employee’s conditions of employment, it can be appropriately implemented so long as the employee is given sufficient “reasonable” notice of the change. The required length of the reasonable notice period to unilaterally implement a change to a fundamental term is determined by the common law, and is the same as the reasonable notice period that is required to give the employee notice of termination without cause. Basically, the period of reasonable notice will vary from individual to individual depending on the employee’s years of service, position, and age.
If at the time of hiring an employee you specifically agreed on the amount of notice required to terminate the employment relationship without cause, then that amount is the same amount of notice that must be provided to legally implement a fundamental change.
- Informed Consent
As discussed above, a fundamental change is only a constructive dismissal if the change is unilaterally imposed. As a result, if the employee consents to the change the employee waives his or her right to allege constructive dismissal. While there are no formal requirements for consent, the bottom line is an employer must be able to prove clear consent was obtained if the change to terms was subsequently challenged by the employee. The steps we recommend to properly document the employee’s consent are as follows:
- The employee should be provided with an adequate opportunity to consider the proposed change, which is to be provided to them in writing. Ideally, this period should not be less than one week; and
- The employee should be required to sign an acknowledgment indicating that they understand, accept, and agree to be bound by the proposed change, having had a reasonable opportunity to consider.
The fundamental takeaway points on constructive dismissal
The potential for restructuring and reorganizing the workplace make an understanding of the concept of constructive dismissal critical. The fundamental take-away points can be summarized as follows:
- When changes within your organization or workplace affect an employee, there is the potential that those changes could trigger the risk of the employee quitting and suing for constructive dismissal as if they had been terminated.
- Practically, changes within organizations that are arguably constructive dismissals occur regularly, often without the employer or employee even recognizing the potential for a constructive dismissal or even being aware of the concept.
- In addition to being aware of the potential risk, the key proactive tools for your organization to eliminate or minimize this risk are to either obtain the employee’s consent to the proposed change, or alternatively, provide the employee with sufficient working notice of the change, which is equivalent to the notice that would be required for a termination without cause.
Brownlee LLP is a Gold Sponsor of the 2018 CPHR Alberta Conference: HR Undefined.
About the Author: Kyle J. Allen: Kyle began working at Brownlee LLP in 2011 as a Summer Law Student, after which, he continued with Brownlee LLP as an Articling Student (Student-at-Law) from July 2013 to July 2014. As an Articling Student, Kyle’s desire to practice labour and employment law was confirmed. In August 2014, he was ultimately accepted by Brownlee LLP as an Associate in its Labour and Employment group practice area. Kyle helps all types of employers handle all forms of labour and employment issues by providing strategic, practical, and cost-effective advice. Learn more about Kyle and his areas of expertise here.