Here’s what you need to know about constructive dismissal
Article co-written & researched by Tyler Anthony
It’s integral for every employer to understand constructive dismissal; especially if they are planning any major changes. Anytime a business retracts or moves to a new location, employees may be required to take on new responsibilities or move offices. When changes such as these occur, employers could be significantly altering the terms of employment for their employees which may result in an employee seeking damages for constructive dismissal.
These situations are often avoidable which is why we’ve created this article. In it, you’ll get a better understanding of what constructive dismissal is, what an employee will need to prove when establishing a claim and what employers and employees can do to mitigate damages. We even included a few tips to help employers reduce the risk of triggering constructive dismissal claims.
What is constructive dismissal?
Constructive dismissal can occur when the terms of employment are fundamentally changed without the employee’s consent. Fundamental changes range from alterations in compensation, position, duties and responsibilities or job location. Constructive dismissal can also occur if:
- an employee is harassed, or abused and can no longer remain in the workplace
- an employee is temporarily laid off and their employment agreement does not contemplate such unpaid suspensions
How is constructive dismissal determined?
To establish constructive dismissal a unilateral change to a term or condition of employment must occur. It is up to the employee to prove and, in order for them to do so, they will require the following:
- proof of how the change negatively affected them and breached a term of their employment contract; and
- if so, how that change substantially altered the term of the contract
These situations are subjective making them difficult for employers to anticipate with certainty whether an employee’s claim for constructive dismissal will be successful. Employees who are successful in constructive dismissal claims are entitled to damages similar to those of wrongful dismissal claims, such as severance pay so, employers looking to make significant changes should do so with caution.
What options do employees have if significant changes occur?
If unilateral changes are made to an employee’s employment they have three options:
- accept the changes and continue the employment on the new terms;
- reject the changes and if the employer still insists on making the changes the employee can sue for constructive dismissal; or
- reject the changes and if the employer allows them to continue working the employee will be entitled to the terms of their original contract.
In the event of constructive dismissal, what duties do the employee and employer have?
If an employee makes a claim for constructive dismissal they have to take the appropriate steps to mitigate their loss by looking for similar employment or, if requested by their employer, staying in their position until the reasonable notice period ends.
When possible, it is most desirable to have an employee work the notice period as it eliminates the requirement to pay an employee if they are no longer working. If requested by the employer, employees may be required by law to work for the duration of their notice period unless it means they will be subject to harassment, abuse or embarrassment, or the request is not within reason. For instance, requiring an employee to move to a different country is not deemed a reasonable request. To exercise this option employers must formally invite the employee after the claim for constructive dismissal has been made.
How can employers mitigate constructive dismissal risks?
Employers must always remain diligent when making substantial changes to the workplace as it may trigger constructive dismissal claims. If the changes impact a lot of employees the potential financial loss could be significant. Here are a few tips employers can follow to mitigate some of their risk:
- Seek legal advice to construct a plan. Especially if you’re an employer who is looking to restructure your workforce and intends to make significant changes.
- Provide employees with proper notice of any potential changes along with sufficient information regarding the nature of the changes, and what will be required of them.
- Ensure that employees consent to and approve the changes in writing.
Hopefully, you found this useful and can use the information to protect yourself and your business. As always, we’re available if you need us and would be more than happy to answer any and all questions you may have.
Contact us today.