What is a Constructive Dismissal?
Generally, when an employee quits their employment they are not entitled to a severance package, as it is the employee's choice to leave. However, situations can arise where the employer acts in a manner that leaves the employee with little choice but to quit. In these cases, the employee may be able to claim that they did not really quit. Rather, they were constructively dismissed by the employer and thus have termination entitlements.
Constructive dismissals typically occur in one of two ways:
- The employer unilaterally breaches or changes a fundamental term of the employment contract; or
- The employer's conduct more generally shows that the employer no longer intends to be bound by the employment contract.
1. Breach of the Employment Contract:
A constructive dismissal can arise is if the employer breaches or unilaterally changes a fundamental term of the employment relationship without the employee's consent and to the detriment of the employee.
The first step is to determine whether the employer's act breached or changed a term of the employment relationship. This is assessed by looking at the terms of the employment contract, if any, as well as the reality of the day-to-day working relationship. For example, if the employer had always paid the employee $25.00/hour, it would likely be a breach for the employer to suddenly start paying the employee only $15.00/hour. This is the case regardless of whether there is a written employment contract.
In most cases, there will be little difficulty determining whether the employer breached or changed the terms of the employment relationship. Common examples include:
- Reduction in compensation;
- Reduction or change in hours of work;
- Demotion;
- Reduction of an employee's responsibilities; or
- Requiring the employee to relocate to a different geographic area.[1]
The second step is to consider is whether the change was substantial. Minor changes and variations to the employment relationship will not amount to constructive dismissal. Rather, the change must impact a "fundamental" aspect of the employment relationship, assessed based on the unique facts of the relationship.
It is also important to note that the change must be without the employee's consent. If the employee consented to the change, either by agreeing to a term in the employment contract allowing for change or impliedly accepting the change through their conduct, the employee may not be able to claim constructive dismissal.
2. General Conduct:
A constructive dismissal can also occur where the employer's general conduct shows that they no longer intend to be bound by the employment contract. This form of constructive dismissal can arise where there is a "poisoned work environment".
A "poisoned work environment" will exist where the work environment becomes toxic, either because of the employer's conduct or their failure to stop other employees' offending conduct. The law recognizes that all individuals, including employees, are entitled to be treated with dignity and respect, and that no employee should be required to work in an environment that does not honour that.
Generally, a poisoned work environment will be created as a result of persistent and repeated conduct, such as ongoing harassment and discrimination or improper discipline from the employer. A stand-alone incident will only create a poisoned work environment if it is exceptionally egregious.
Whether a work environment is poisoned is assessed objectively. The fact that the employee personally feels or genuinely believes that continued employment would be intolerable may not be sufficient to establish constructive dismissal. Rather, the question is whether a reasonable bystander would think that continued employment is not tolerable.
Termination Entitlements and Damages
If an employee can prove constructive dismissal, they will have the same termination entitlements as if the employer directly terminated the employment relationship. This means the employer will be required to provide the employee with pay in lieu of notice of termination, or severance.
Additionally, an employee who has been constructively dismissed may be able to claim extra damages if the employer's behavior was in bad faith or particularly high-handed.
Takeaways:
Employment relationships are reciprocal; both parties are required to carry out their obligations and duties. If an employer fails to fulfil its obligations in a major way or attempts to fundamentally change the terms of the relationship, the employee may able to claim constructive dismissal and seek severance as if the employer had directly terminated the relationship.
As always, employers and employees alike are encouraged to seek legal assistance prior to making any significant employment decisions. Lee Workplace Law would be happy to answer any questions you may have about your workplace rights and obligations.
[1]Please note additional considerations currently arise as a result of legislative changes to address the COVID-19 pandemic. For more information on constructive dismissal claims during COVID-19, please check out our blog posts: Deemed COVID-19 Emergency Leave of Absence in Ontario, not Constructive Dismissal and Continuing Debate over Infectious Disease Emergency Leave and Constructive Dismissal Claims.
