Managing the risk of constructive dismissal November 09 2015
In today’s ever changing workplace environment, it’s essential to understand the significance of a constructive dismissal claim to properly limit the risk of legal liability.
The potential for constructive dismissal arises when an employer makes a unilateral and fundamental change to a term or condition of an employment contract. If the employee refuses to accept the change and the employer tries to impose it anyway, the employee may treat the employer’s actions as a constructive dismissal and sue for damages as if he or she had been terminated without cause or notice.
Not every change in employment, however, will amount to a constructive dismissal. What constitutes a unilateral and fundamental change depends on the terms of each employment contract, and, therefore, there is no “one-size fits all” approach to constructive dismissal.
There are four essential considerations in any successful constructive dismissal claim:
- What are the express and/or implied terms and conditions of the contract? Only changes to the essential terms of the employment contract will allow the employee to reject the change and conclude that he or she has been dismissed.
- Has there been a breach? In order for a breach of contract to exists, there must be an absence of consent on the part of the employee to any change in the terms and conditions implemented by the employer. If the employee accepts the change by, for example, continuing to work without objection, the change may be deemed to have been accepted by the employee.
- Is the breach a fundamental one? When the change is large enough to be said to be a 'fundamental' change, then it can be characterized as constructive dismissal. To put it in context, common examples of changes to an employee’s working conditions include:
- Changes to the essential duties of the employee
- Changes in reporting functions
- Changes in hours of work or the number of shifts worked
- Changes in remuneration or termination of a bonus
- Reductions in status
- Changes in geographic location
- Assuming there is a breach, are the working conditions such that the employee should consider remaining on the job? In addition to demonstrating that constructive dismissal has occurred, the employee has an obligation to do his or her part to mitigate the loss by making reasonable attempts to find employment.
These considerations are not simple and there are a number of factors that apply in each of the considerations. To reduce the risk of constructive dismissal claims, employers should obtain the employee’s consent for any substantial changes in the terms and conditions of employment.
When possible, employers should provide notice of the change to all affected employees to minimize the possibility of constructive dismissal claims. For example, if an employee would normally be entitled to 4 weeks notice of termination, the employer may provide the employee with 4 weeks working notice of the employer’s intention to unilaterally alter the employment contract. At the end of the working notice period the employee’s previous contract would be terminated, and the employee would be free to accept the new terms and conditions of employment.
Notwithstanding this, providing the employee with reasonable working notice of a fundamental change does not totally eliminate the risk of liability for constructive dismissal. If there is significant “push back” from the employee, the employer should obtain legal advice about whether or not the planned changes are substantial enough to create a risk of a constructive dismissal.