Constructive Dismissal

What do you do if your employer suddenly slashes your compensation package by 20 percent?

Or if you are unexpectedly advised that from now on, you will be reporting to the person you hired and trained last year?

Or you will now be required to be in the office every day, rather than working from home, and the office is moving from Markham to Hamilton?

What are your rights, and do you have the right to refuse? While the answer depends on the circumstances, you probably do.

All of the examples above can constitute a constructive dismissal. Simply put, a constructive dismissal occurs when one party to the employment agreement (usually the employer) unilaterally makes a substantial change to a fundamental term of the employment agreement.

What constitutes “substantial” and “fundamental” change?

Of course, not every change will constitute a constructive dismissal. First of all, it must be a substantial change. There are no absolute rules with respect to what is “substantial” as there are so many different contexts in which this must be considered and every case will have to be assessed based on its own particular circumstances. Minor or relatively inconsequential changes will not give rise to a constructive dismissal, but courts are wary of allowing employers to impose drastic changes.

What is “fundamental” will also vary depending upon the facts of a particular case. Your compensation, role and duties will almost always constitute fundamental terms of the employment relationship. But other things can as well. Generally speaking, being moved from one desk to another will not violate a fundamental term of the contract. However, if it is clear that one location has a greater degree of prestige within the hierarchy of the organization, and the change will negatively impact you and your perceived role, then it may well be a constructive dismissal.

Every case is fact-specific, but the point is that in order for a person to have a right to complain about the change, it must be a significant change and it must impact an important issue. Furthermore, you cannot simply tolerate the change and then complain later on. You must make your objection known within a reasonable time.

Does the employer have the right to make the change?

A change will only constitute a constructive dismissal if the employer did not have the right to impose it. In some cases, the employment contract will give the company the explicit right to do so. In others, there will be an implied right based upon the circumstances. It is only where that right does not exist that the individual may have a legitimate right to object. This is why it is critical that you review any contract before you sign it.

Constructive dismissal is complicated

When an individual is dismissed outright, the situation is much simpler. First, it is clear that there was a dismissal, and the main question is the entitlement to compensation.

On the other hand, if you have been constructively dismissed, you still have a job. In most cases, the employer will deny any allegation of constructive dismissal and also take the position that even if there was a constructive dismissal, the employee has a duty to mitigate their damages by remaining in the position. This will often be accompanied by a threat that if the employee resigns, the employer will not only deny there was a constructive dismissal, but also allege the employee failed to remain in the position when it was perfectly reasonable for them to do so.

This can pose a significant risk for the employee, as it is possible a court might disagree that there was a constructive dismissal or agree that the employee was constructively dismissed but find that a reasonable person would have stayed in the job until they found something else. In that case, their entitlement to compensation will be greatly reduced or wiped out completely.

How We Can Help

Dealing with a potential constructive dismissal can be quite complicated and individuals are wise to obtain legal advice before taking any action that might jeopardize their rights going forward. We are happy to work with you to explain your rights and develop a strategic approach based on your goals.

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If you think you may need an Employment Lawyer, then you probably do.