CONSTRUCTIVE DISMISSAL FOR EMPLOYERS

Constructive dismissal occurs when an employer makes significant changes to the terms and conditions of an employee’s job without their consent. These changes may force the employee to resign, and under Canadian law, this resignation could be treated as a termination, potentially entitling the employee to compensation.

Common examples include:

• A significant reduction in an employee’s salary or benefits
• A demotion or major change to job duties
• Relocation to a distant workplace (or requiring a shift from remote to hybrid or in-person work)
• Allowing or creating a toxic or hostile work environment
• Fundamental changes to work hours or schedules

• Communicate Clearly: Discuss any proposed changes with the employee before implementation and clearly delineate the changes.
• Seek Consent: Obtain written agreement from the employee when making substantial changes to their role, compensation, or work conditions.
• Provide Notice: Since a constructive dismissal is effectively a termination of the current employment agreement, you can put a new agreement in place by providing sufficient notice, but that can be months or even years.
• Document Decisions: Maintain detailed records of discussions and agreements regarding changes.
• Address Workplace Issues: Take proactive steps to prevent and address toxic or hostile work environments.

• Evaluate the Objection: Assess whether the change is essential to business operations and whether it significantly alters the employment terms. If it is not a substantial change, you can insist upon it; if the employee leaves, it would be a resignation.
• Consider Reversing the Change: If feasible, reversing the decision may resolve the issue.
• Negotiate Solutions: Explore alternative solutions with the employee.
• Consult an Employment Lawyer: Seek legal advice to determine the best course of action and mitigate potential risks.

If an employee successfully claims constructive dismissal, you may be required to provide:

• Severance pay, which could be up to two years of lost income and benefits
• Compensation for additional harms, such as mental distress, in certain cases

There is no specific legal time limit, but employees are expected to object within a reasonable time. Delayed objections may be interpreted as acceptance of the change. Prompt communication and resolution are key.

If the relationship becomes untenable, it may be necessary to negotiate a severance package to avoid prolonged disputes. Alternatively, litigation may be necessary. Early legal advice can help determine the best strategy.

An employment lawyer can:

• Advise on whether a proposed change could lead to constructive dismissal
• Assist in drafting agreements and communications to mitigate risks
• Help negotiate resolutions if disputes arise
• Represent the employer in legal proceedings if necessary

Understanding and managing constructive dismissal risks is essential for maintaining strong employment relationships and avoiding costly legal disputes.