The term “constructive dismissal” has become a cornerstone in discussions surrounding employee rights and employer responsibilities across Ontario. Regardless of which side of the employment relationship you are on, it is important to understand the nuances of constructive dismissal, particularly so employers are aware of the potential risks and legal exposures.

This blog post examines the actions that may constitute constructive dismissal, key factors that may trigger employee claims, and the potential risks employers must be mindful of to foster a fair and compliant workplace. This information is intended to equip employers with the knowledge necessary to navigate the thin line between workplace evolution and the potential risks associated with constructive dismissal claims.

What Is Constructive Dismissal?

An employment relationship is generally built on a verbal or written contractual agreement between the employee and employer that outlines various terms such as compensation, hours of work, and other expectations. Constructive dismissal refers to a situation where an employer imposes significant changes that alter the fundamental terms of an employee’s employment to the extent that an employee is actively pushed out of their job and feels compelled to resign, although the employee has not been formally terminated.

Constructive dismissal can be distinguished from wrongful dismissal, which occurs when an employer terminates an employee’s employment without cause or fails to comply with the proper procedures associated with termination.

The implications of such actions by an employer are far-reaching, not only affecting the professional lives of individuals but also posing potential legal challenges in the event of litigation. From significant changes in job responsibilities to alterations in compensation structures, constructive dismissal claims may be triggered by a variety of conduct and actions, even those that are subtle. To mitigate the risk of constructive dismissal claims, employers must effectively mitigate risk while making decisions regarding staffing and terminations.

How Does Constructive Dismissal Occur?

Constructive dismissal generally occurs in one of two different ways:

• The employer unilaterally and fundamentally changes one or more of the existing terms and conditions of the employment relationship, amounting to a breach of employment contract or constructive dismissal; or
• The employer forces the employee to work in a poisoned and hostile work environment.

The term “constructive” refers to the alleged breach of contract arising from the employer’s behaviour or actions. This is distinguished from a termination, where the employer expressly articulates that the employment of the individual is being terminated.

Some common examples of unilateral changes made by employers that may constitute constructive dismissal include, but are not limited to:

• Changes to the employee’s responsibilities, duties, or tasks;
• Changes to the employee’s job conditions or responsibilities; and
• A reduction to the employee’s compensation structure.

Navigating Allegations of Constructive Dismissal by Employees

A constructive dismissal claim can open up a minefield of legal considerations and exposure to risks for employers. Therefore, it is critical for the employer to obtain trusted legal advice as soon as possible to assess the strength of its position, develop a strategy to achieve the desired results and mitigate potential liability.

When an employee commences a claim for damages arising from constructive dismissal, the employee bears the onus of establishing the employer acted or behaved in a way that amounts to constructive dismissal. On a balance of probabilities and using objective evidence, the employee must prove the employer’s unilateral actions or behaviour equated to a repudiation of the existing terms of the employment relationship and constituted a breach of the employment agreement (and, therefore, constructive dismissal). However, if the employee remains silent after such action or behaviour has taken place without speaking up, the employer may be able to claim the employee condoned the change by continuing to work.

If an employee proves they have been constructively dismissed from their role, the employer may be required to provide severance pay to account for damages resulting from lost wages, bonuses, benefits, or other employee entitlements.

What Employers Should Know About Constructive Dismissal Claims

By taking proactive steps and seeking legal advice from a knowledgeable employment lawyer, you can help ensure that you are aware of possible risks and how to mitigate them before making changes to any employment relationship. Whether you are looking to transfer an employee to a new role or reduce an employee’s hours of work, consulting first with an experienced employment lawyer can help you understand how the law might apply in various circumstances and help you navigate employment-related changes while mitigating exposure to legal liability.

From providing an initial defence to pursuing settlement through various dispute resolution avenues, including litigation when necessary, a trusted employment lawyer can help ensure that the matter is adequately and effectively managed so that work can resume without extensive interruption.

Contact the Employment Lawyers at Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Constructive Dismissal Claims

If you are an employer trying to navigate terminations without fear of facing claims of wrongful dismissal or constructive dismissal, it is essential to obtain trusted legal advice as soon as possible to understand and preserve your rights and entitlements. The knowledgeable labour and employment lawyers at Grosman Gale Fletcher Hopkins LLP advise employers and employees on various issues resulting from terminations with and without cause. To learn how we can help you, contact us at 416.364.9599 or reach out to us online to schedule a confidential consultation with a member of our team.