What is a Constructive Dismissal?

Constructive dismissal is the most confusing area of employment law, as it is very individualized, meaning that the impact of a change made is dependent upon the person experiencing the change. What constitutes a hardship for one employee may be perfectly acceptable to another.

Employers wishing to alter the terms of their agreements with employees due to the recent legislation changes in Ontario should be cautious that they don’t trigger a Constructive Dismissal complaint.

In a constructive dismissal, the employer does not actually terminate employment. Rather, they significantly and unfavourably change the terms of the employment agreement, which may or may not have the ability to render the employee unable to fulfill the terms of employment.
Employees who experience a constructive dismissal are entitled to resign the position. Since it is a “without cause” dismissal, it requires the employer to pay the employee termination pay. This is where the lawsuit comes in, because usually the employer tries to insist that there “is still a job for the employee” or “they quit”.

The “test” that the courts use to determine if a constructive dismissal has happened is: Would a reasonable person in this employee’s situation find the changes imposed by the employer are unreasonable and unfair? If the answer is “yes”, then a constructive dismissal has occurred. Each case will depend upon its own particular facts.

Some common areas to watch out for:

Compensation changes – minor changes of 5% or less are fine, anything greater than that could be a dismissal. In Farber v. Royal Trust, the employer closed a branch and transferred the Manager, he sued and won $150,000.00 (in 1997).

Downgrades in authority, status or responsibility – in Hainsworth v. World Peace Forum the employee was demoted from the position of Executive Director and told to report to someone who was her former co-director as the result of “restructuring”. She sued and won more than $60,000.00, despite the employer’s reasoning that she was not meeting the performance standards of the job.

Other successful lawsuits have been won on the grounds of geographic relocation, changes to hours and scheduling, layoffs, and “untenable work environments” including “toxic/hostile” or “bullying” atmospheres.

Don’t get caught “not knowing” the things you need to! Call me today for help with your employee issues.