When you hire an employee and have a written employment contract, both you and the employee are responsible for upholding what is outlined in that contract. You may have some flexibility built in in places, but generally speaking you have agreed to employ them in their position, at an agreed-upon wage, performing agreed-upon duties, etc. If you single-handedly make major changes to this agreement without the employee agreeing, such as cutting their salary or commission structure, making major changes to their job duties, etc. then the employee can claim that they were constructively dismissed, or essentially fired without actually hearing those exact words.
The term constructive dismissal is often misused by employees who don’t fully understand the implications. Not every small change that you make as an employer will result in a constructive dismissal. Changes need to be substantial, so small changes in duty or a small variation in pay will not meet that threshold. Also, judge made law has shown that a temporary layoff, if not specifically allowed by the employment contract, can be considered a constructive dismissal. Bad faith can take other forms too – making an employee miserable with the hopes that they quit and you can avoid paying out termination and severance can come back as an allegation of bad faith. This can be a common strategy, and courts have viewed it just as seriously as alleging there was just cause without a valid reason.
If the court agrees that there was a constructive dismissal then the employee will be eligible for termination pay, which could become a costly venture, so it is always best to consult with an employment lawyer before making any significant changes. Learn more about constructive dismissal and its implications here.
