Constructive dismissal is a term that is often used but is sometimes misunderstood by those in the employment world. Unlike other forms of termination or dismissals, constructive dismissal can be difficult to identify, and employees may not be sure of their remedial options. 

This blog will provide an overview of constructive dismissal, including examples of actions which may constitute constructive dismissal, the test for constructive dismissal, remedies, and the benefits of working with an employment lawyer to resolve your constructive dismissal matter.

What is Constructive Dismissal?

Constructive dismissal can occur when an employer unilaterally changes or behaves in a way that results in a breach or fundamental change to the terms of an employee’s employment contract without the employee’s consent. In many cases, such changes result in the employee’s resignation. In Potter v. New Brunswick Legal Aid Services Commission, the Supreme Court of Canada noted that a “finding of constructive dismissal does not require a formal termination, but a unilateral act by the employer to substantially change the contract of employment.” However, whether an action by an employer will constitute constructive dismissal will depend on the circumstances of the case. 

Constructive dismissal differs from other types of dismissal or terminations as the changes force the employee to resign. 

Signs of Constructive Dismissal

There are various signs which may suggest that constructive dismissal has occurred, which can include, but are not limited to:

  • A demotion,
  • Suspension without pay,
  • Forced changes to working hours,
  • Toxic work environments or harassment in the workplace, or
  • Significant changes to salary or wages, work location, or job responsibilities. 

Determining Whether Constructive Dismissal Has Occurred

Not every change made by an employer will constitute constructive dismissal. Employers in Alberta may make minor, reasonable changes to the terms of your employment contract. For instance, an employer may make a minor adjustment to an employee’s role and related job responsibilities that do not substantially alter the employment contract. An employment contract may also contain clauses that permit specific changes to occur, which the employee agreed to by signing the employment contract. 

A change made by an employer may also be permitted if the changes were mutually agreed to between the parties. Employers should ensure that such changes are agreed to in writing, and employees should ensure they understand them. 

Two-Part Test for Constructive Dismissal

In Potter v. New Brunswick Legal Aid Services Commission, the Supreme Court of Canada emphasized a two-part test to determine whether constructive dismissal has occurred. 

The first limb of the test requires a review of specific contractual terms to determine whether the employer’s unilateral change constituted a breach of the employment contract, and if so, it must also be found to alter an essential part of the contract substantially. 

The second limb of the test requires a court to ask whether a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed when the breach occurred. In assessing this, a court must not consider evidence involving information that was neither known to the employee nor reasonably foreseeable in the circumstances.

What Options Do Employees Have?

If you are a non-unionized employee who believes they have been constructively dismissed as a result of their employer’s unilateral conduct or behaviour, there may be several options available to you. It is important to express your concerns with your employer and review your employment contract to determine whether your employer is permitted to make the changes in question. Documenting such interactions, communications, and changes can be important if legal action is taken. It is also critical to seek legal advice from a trusted employment lawyer before taking any formal action to ensure you understand your rights and options under the law so that you can make informed decisions throughout the process. 

However, acceptance of such changes that were not permitted in accordance with your employment contract may prevent you from being able to claim constructive dismissal. 

Severance Pay Entitlement

If you have been constructively dismissed, you are entitled to severance pay. Although the value of severance pay will vary depending on various factors, such as your age, length of service, and position, among other things, you will be entitled to the minimum severance pay outlined in Alberta’s Employment Standards Code. Under the legislation regime, you may be entitled to severance pay for one to eight weeks, although under the common law, a court may determine that you are owed more. However, seeking legal advice on a proposed severance package before signing is important to ensure that you are not giving up any of your rights or accepting less than you are entitled to.

How Employers Can Mitigate Against Constructive Dismissal Claims 

Constructive dismissal claims made by employees are generally an undesirable outcome for both parties. Not only does a lawsuit affect both parties, but in some cases, these claims may impact employment relationships with other employees and can result in the loss of other workers. Therefore, employers need to take steps to protect themselves and prevent constructive dismissal claims from being made against them. 

It is important for employers to provide an employee with notice of a proposed change and seek the affected employee’s consent before implementing such a change. However, to ensure that the best interests of the employer and company are protected in any situation, it is crucial for employers to seek proactive legal advice before making changes to an employment relationship or terminating an employee.

The Employment Lawyers at Getz Collins and Associates in Calgary and Strathmore Provide Advice on Employment Dismissals and Terminations

Employment law matters involving terminations, dismissals, and other workplace-related disputes can often involve complex issues and the interpretation of key documents, such as employment agreements. Whether you are an employee who believes they have been constructively dismissed from their job or an employer who is seeking to implement a workplace change, the trusted team of employment lawyers at Getz Collins and Associates can help you understand your options. To speak with a member of our team regarding your constructive dismissal concerns, contact us online or call us at (587) 391-5600.