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5 Tips to Avoid Constructive Dismissal Claims

A constructive dismissal claim arises when an employer unilaterally changes a fundamental term of the employment agreement and, while the employer has not directly terminated the employee, the employee feels as though they are being pushed out and quitting is their only option.

There are two forms of constructive dismissal:

Single unilateral change to an essential term of employment
The change must be substantial, unilateral and strike at the essential terms of the employment agreement. Most often these types of claims involve a change to an employee’s compensation, place of work and/or demotion which may involve such changes as the reporting relationship, job title, substantive duties, lower prestige and/or status.

Series of acts that indicates the employer no longer intends to be bound by the contract
Constructive dismissal can also arise when a series of acts, taken together, show that the employer no longer intends to be bound by the contract. The cumulative effect of these changes can result in a fundamental breach of the employment agreement.

But there is good news! You can reduce the likelihood of a constructive dismissal claim by implementing the following five strategies:

1. Ensure your employment agreement allows for flexibility to unilaterally change certain terms

From the very beginning of the employment relationship your employment agreement can address situations that could give rise to constructive dismissal claims. The employment agreement should include terms that allow the employer the flexibility to change the employee’s work location, duties, compensation, benefits, position, title and reporting structure.

2. Develop channels for effective communication

It may sound obvious, but this is highly effective! Full and honest communication ensures that employees feel engaged in their role and workplace. Employers should make sure that expectations are clearly communicated by providing employees with access to workplace policies. If an employee voices concerns of constructive dismissal, deal with these concerns immediately. Many employers do not realize that an employee does not have to quit in order to claim constructive dismissal. By developing channels for effective communication, employers can address employees concerns before a claim for constructive dismissal arises.

3. Enter into a new employment agreement based on the revised terms

Entering into a new contract that reflects fundamental changes to the employment relationship ensures that you have the employee’s consent to the revised terms. In order to constitute a “new” employment agreement, an employer must provide new consideration in exchange for the changes. Consideration includes job security, new benefits, a bonus, a raise, or a promotion.

4. If you need to make a fundamental change, give the employee reasonable notice of the change

Reasonable notice is the same notice period that you would provide if you were terminating the employee without cause. Reasonable notice is determined by the termination provision in the employment agreement, section 56 of the Employment Standards Code or under common law.

5. Terminate employment and offer employment on revised terms as mitigation employment

As in all employment claims, an employee who claims he or she has been constructively dismissed is required to take reasonable steps to mitigate his or her losses by looking for new employment. The duty to mitigate can require an employee to consider a reasonable offer of re-employment. By offering re-employment on the revised terms you can protect yourself in the event of litigation by preparing a mitigation defense.

We understand that change is inevitable in many employment relationships. As such, the lawyers in Field Law's Labour and Employment Group can assist you in drafting strong and flexible employment agreements, termination documents and navigating any constructive dismissal claims that may arise.