Beware Constructive Dismissal – Best Practices for Employers

As provinces continue through their respective reopening plans, employers are beginning to recall their employees back to work. Given the number of operational challenges present due to COVID-19, it is quite possible that the organizations employees are returning to have undergone some changes.

Employers should carefully review organizational changes that have an impact on the terms and conditions of employment of their returning employees. Some of these changes may run the risk of a constructive dismissal claim.

Constructive Dismissal

Where an employer unilaterally reduces an employee’s pay or benefits or reassigns work duties to such an extent that the essential nature of the employee’s position is altered, the employee may potentially consider their employment contract to have been repudiated and claim against their employer for constructive dismissal and monetary damages. It is important to note that the change need not reference specific terms of an employment agreement or job description. Rather, an alteration to an internal policy or procedure that has a significant impact on an employee’s terms and conditions of employment may be enough to trigger constructive dismissal.

The constructive dismissal test is highly contextual to the terms and conditions of employment, the nature of the employment, and the specific employer conduct. Although each case must be reviewed on its own facts, unilateral changes to salary, benefits, hours of work, geographic work location and the scope of an employee’s duties and responsibilities are the most common changes which can result in a finding of constructive dismissal.

Minor changes to an employee’s job duties will likely not trigger a constructive dismissal, such as the requirement to wear personal protective equipment. Employers have the right to make reasonable changes to an employee’s job duties and responsibilities in order to properly manage their business and adapt to changing market conditions. It is possible, but as yet unknown, that courts will provide employers with greater latitude in making unilateral changes to employment terms, when directly related to the current pandemic.

An employer is also generally permitted to amend more significant components of an employee’s job if it provides notice to the employee equivalent to the employee’s notice entitlements pursuant to statute, their employment contract and the common law. The appropriate amount of notice is equivalent to if the employee was being terminated without cause and provided working notice of that termination date. An employer can also reach an agreement with an employee by providing them something of value in exchange for agreement to the changes made to their employment.

Employer Best Practices

Employers should proactively review the impact any changes to organizational practices or policies may have on employee positions. The following general practices and considerations may assist in reducing employee claims for constructive dismissal:

  1. Where changes are significant, provide employees advanced notice of when these changes will take place. Where possible, the amount of notice should be equivalent to the notice period the employee is entitled to if they were being terminated without cause.
  2. If notice cannot be provided, consider providing the employee something of value in exchange for the changes, such as additional vacation time, stock options or a paid bonus upon returning to normal operations.
  3. Reduce the organizational changes to writing and have the affected employees sign off that they have read, understood and agree to the changes. This is especially important if you are striking a bargain with the employee of providing something of value in exchange for agreement to the change in employment terms and conditions, rather than providing them with the required notice of the change.
  4. Where there are several significant changes to an employee’s position, consider offering the employee new employment under a new employment contract. Carefully review how best to offer the new employment to the employee and evaluate the risks to the organization if the employee does not accept the new position.

Duty to Mitigate

An employee who has been constructively dismissed is obligated to mitigate their losses by finding alternative comparable work. Given the current economic climate, it may be more difficult to obtain similar employment. Often, employees have not been required to mitigate such losses by continuing to work with the employer; however, in some circumstances, an employee may have an obligation to mitigate their losses by continuing employment with the employer. This is most likely to occur where the salary offered is similar, the working conditions are the same (or not substantially different), and where the personal relationships are not acrimonious. It remains to be seen whether the impact of COVID-19 will expand the circumstances in which an employee is obligated to mitigate their losses by continuing to work for the employer, or if such findings will remain an uncommon occurrence.

It is incredibly contextual and fact-specific to determine whether changes to an employer’s operations could result in constructive dismissal of employees. MLT Aikins would be pleased to assist you with examining your options for recalling and returning employees to work in order to reduce the possibility of receiving a constructive dismissal claim.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.

Contact Us CTA