Constructive dismissal is easily one of the most popular phrases from employment law within the past two decades. It is also one of the most widely misunderstood legal concepts in this field. Far too often, employees will come to see us claiming they have been constructively dismissed and then produce their termination letter, their Record of Employment, and other key documents that indicate this was not in any way constructive dismissal.
Dismissal is a common problem for employees – most employees will go through a ‘layoff,’ ‘downsizing,’ or ‘dismissal’ at least once in their careers. Usually, they have done nothing wrong, and done nothing to deserve being let go, but it is an unfortunate reality of employment in the 21st century.
Constructive dismissal, though, is something else entirely. In these situations, an employee is not truly dismissed in the classical sense, but their working relationship has changed so dramatically that they may well have been.
What is constructive dismissal, and what makes it so unique?
A primer on constructive dismissal
When an employee is dismissed or ‘let go’ in Ontario, an employer is required to give them notice, or pay in lieu of notice. This may mean working notice – an advanced notice that their job will end on a set date, which allows them to prepare for the future. It often means pay in lieu of notice – dismissal that same day along with either a lump sum payment, or continued salary throughout the notice period.
Yet in constructive dismissal, there is no official notice that an employee is being dismissed, and no noticeable dismissal takes place. Instead, the employer has unilaterally (by themselves, without input from the employee) made changes to the employment relationship that are so serious, and so significant, that they fundamentally alter the nature of the work.
The leading case on constructive dismissal is a case called Potter v. New Brunswick Legal Aid Services, 2015 SCC 10, where it was actually the head of that province’s legal aid program that had been constructively dismissed by their employer due to a temporary layoff. The employee had initially taken sick leave, but then was advised he was being suspended with pay. The employer applied to have his employment terminated with cause, but he sued for constructive dismissal before that could take place.
Even though the employee had been paid throughout their suspension, there was nothing in their agreement with the employer that had allowed for it. In other words, the employer had altered the terms of the working relationship so significantly that they had, in a sense, fired him without actually firing him. While it looks as though they were planning on doing so in the Potter case, that is not always how constructive dismissal works.
What constitutes constructive dismissal?
Not every change that an employer makes is automatically constructive dismissal. This is another mistake that employees make frequently, and it is not how the law works. Employers have a significant amount of freedom in how their employees work, and these freedoms are usually built directly into the employment contract to allow employers to carry on business.
Asking an employee to stay late for a few hours one evening, or to help out on an additional project, is not usually constructive dismissal as it does not represent that significant or substantial change. Similarly, moving the office location 5 km away and asking employees to attend a new location, with
an added 10-minute commute time, does not warrant constructive dismissal.
There are, however, significant and substantial changes which might meet that threshold. Unilaterally reducing an employee’s pay, benefits, title, or seniority all represent a significant change to their employment, and may constitute constructive dismissal. Moving the office 10 km may not meet the mark, but moving 1,000 km away suddenly becomes an impractical commute, and may meet the mark.
Employers frequently wrestled with this question in the wake of the COVID-19 pandemic, and while drafting their return-to-office policies. Ending an informal work-from-home arrangement and expecting employees to return to the office may have seemed draconian to employees, but it was likely not constructive dismissal. Yet if employees had work-from-home policies ingrained in their contracts, and those were suddenly taken away, that might just meet the mark.
What can employers do to prevent constructive dismissal?
In a word, the answer is ‘notice.’ If an employer is planning on making a significant change to the terms of an employee’s employment, providing them with adequate notice of the change will allow the employee time to either go ahead with the decision, or it can serve as working notice if they choose not to agree to the new terms.
This may not work well in terms of a demotion, but it can help prevent claims in the event of an office relocation, for example. Notifying the team that the office will relocate in X number of months, and offering the employees the opportunity to relocate or to end their employment, will mean that the decision is no longer unilateral. If employees require additional notice under common law, employers can pay these terminations out properly so as to avoid wrongful dismissal claims.
What can employees do in constructive dismissal?
If you believe, based on these criteria, that you are being constructively dismissed, the worst thing you can do is nothing. If you do not protest the changes, or take no action, you may be seen as acquiescing, or silently agreeing to the changes. If you resign before seeking legal advice, it can then be difficult to ‘unscramble the egg,’ and claim that you did not actually resign but were instead forced out.
Whether you are an employer or an employee in this scenario, good legal advice is key. Each step in this process is important, and advice from our experienced team of legal professionals can help avoid costly mistakes. Contact us today to set up a consultation.
