What is constructive dismissal?
Constructive dismissal refers to a situation where an employee quits and sues the employer for wrongful dismissal as though he or she had been fired.
How does constructive dismissal happen?
Constructive dismissal occurs when the employer makes significant, unilateral changes to an employee's terms of employment, or otherwise shows an intent to no longer honour the terms of the employment relationship. When a constructive dismissal occurs, the employee can either accept the change (by continuing to work) or quit and sue the employer.
How can I avoid claims for constructive dismissal?
There is a fine line between what is and what is not considered "constructive dismissal". The differences are subtle, but important. Courts take an "all or nothing" approach to constructive dismissal, meaning the employer's liability is either 0% or 100%, and nothing in between.
Employers should always seek expert legal advice to avoid getting blindsided by a constructive dismissal claim. An experienced employment lawyer can help your company determine how to manage your workforce while limiting liability and reducing the potential for litigation. For instance:
Respect: First, and most important, always treat your employees with the utmost of respect and dignity, especially if they do not return the favour. Courts have held that constructively dismissed employees must continue to work for the employer, so long as they are not being required to work in an atmosphere of hostility, embarrassment, or humiliation. Treating your employees with respect will not only limit the company's liability in the event of a constructive dismissal claim, it will discourage employees from making such a claim in the first place.
- Reduction in pay: Not every reduction in pay results in constructive dismissal. Generally, an employer may reduce an employee's pay modestly, in accordance with business needs. Constructive dismissal starts to become a very significant risk with reductions in pay of around 15-20% or more.
- Demotion: Formally demoting an employee, together with a reduction in pay and/or responsibility, is an invitation for a constructive dismissal claim. To prove constructive dismissal, and employee must show some objective criteria to prove that a "reassignment" rose to the level of a constructive dismissal.
Arbitrary suspension: Never suspend an employee - even with pay -- without having a good reason and explaining that good reason to the employee. Employees who are being investigated for wrongdoing can be removed from the workplace, but they have a right to know why.
Dangerous/poisoned work environment: Always keep an ear to the ground in the workplace. Unfortunately, employers are often the last to learn about serious harassment, abuse, discrimination, or risk of physical injury in the workplace, which can lead to costly claims for constructive dismissal.
- Discipline: Never shy away from disciplining your employees where it is warranted for fear of a constructive dismissal claim. Employers are permitted, even encouraged to give employees warnings where their job security is in jeopardy due to the employee's misconduct, negligence, or poor performance.
My former employee is alleging constructive dismissal - now what?
In most cases, the best strategy is to immediately invite "constructively dismissed" employees to return to work. If they refuse, their case for constructive dismissal will become contingent upon proving there was a work atmosphere of hostility, embarrassment or humiliation.
What can Hyde HR Law do for my company?
The lawyers at Hyde HR Law are experts on constructive dismissal. We have guided several of our employer clients through workforce adjustments and constructive dismissal claims. In many cases, we have formulated strategies that have avoided the issue of constructive dismissal altogether, dodging the need to defend a long, expensive constructive dismissal case. Contact Hyde HR Law for expert advice and representation.