By Jessica Landry
A constructive dismissal can happen when an employer makes a fundamental change to a key aspect of an employee’s contract or the terms of their employment without the employee’s consent. The fundamental change is essentially a breach of the employment contract, and because the employer has breached the contract, the employee can treat the contract and their employment as terminated. When faced with a constructive dismissal, the employee is allowed to resign and then make a claim for damages (compensation) for wrongful dismissal. The amount claimed for damages for wrongful dismissal is sometimes called severance pay or pay in lieu of notice.
There is an important difference between when an employee is constructively dismissed, which entitles them to resign and receive compensation, and when an employee quits. When an employee quits, they are voluntarily resigning from their employment and they are not entitled to make a claim for damages for wrongful dismissal.
Some examples of when a fundamental change can amount to constructive dismissal include: a reduction in pay, a change in work location, changes in hours or number of days worked per week, a change in status or authority, and a change in role or responsibilities. An employee may also have been constructively dismissed if an employer creates a hostile work environment through bullying or harassment.
It is important that an employee carefully evaluates the circumstances before resigning and claiming constructive dismissal. Employers are generally afforded a reasonable degree of flexibility when assigning responsibilities at work. For example, a lateral transfer at work will not generally be considered a constructive dismissal. Before an employee treats a fundamental change at work as a constructive dismissal, they should ensure they understand the terms of their employment contract and the impact of those terms. It is possible that an employer may be permitted to make certain changes under the employment contract, if that is the case, the employee will not be able to claim constructive dismissal.
Time is critical when it comes to claiming constructive dismissal. If an employee waits more than a week or two after the fundamental change to their employment then they may be deemed to have accepted the change and they will not be able to claim constructive dismissal or any damages.
Pursuing a claim for constructive dismissal is risky for an employee, since they have to first resign their employment and then argue that the terms of their employment were so significantly changed that they are entitled to compensation for wrongful dismissal. If they fail in this argument, they are left without their job and without any compensation.
In summary, if your employer makes a fundamental change to a key aspect of your employment you may be entitled to resign, claim constructive dismissal, and receive compensation for wrongful dismissal. Whether the circumstances amount to constructive dismissal will be largely dependent on the context and the terms of your employment contract. If you are an employer you should be cautious about making any significant changes to the terms or conditions of an employee’s employment that might give rise to a claim against you for constructive dismissal. If you are an employee considering a constructive dismissal claim or an employer thinking about changing the terms of an employee’s employment, you should consult a lawyer to receive situation-specific advice.
This article is for information only and is not intended to be legal advice. If you have any questions or would like further information, you should consult a lawyer.
