Constructive Dismissal

To put it simply constructive dismissal is where an employee is in effectively forced to quit by the employer as a result of the employer attempting to unilaterally alter the terms of the employment contract. A significant reduction in pay or hours, a change of duties, or a loss of job title and status are all potential triggers for a constructive dismissal.

When an employer changes the nature of the employment so seriously that it effectively becomes a new job the law treats that the same as firing someone. They have “constructively” dismissed the employee. This prevents employers from using a change in job duties as a backdoor to firing employees without having to go through the proper procedures.

Of course not all changes the circumstances of one’s employment rise to the level of constructive dismissal. The changes must be “substantial”, a word which is open to interpretation by the courts as it has no strict definition in this context. A reduction in pay is a classic example of constructive dismissal, but a small reduction (less than about 10%) wouldn’t be considered substantial (unless bundled with other changes). Because the term is so open to interpretation it can be difficult to predict what will or will not be considered substantial by the courts, but it is possible to gauge a general idea.

As constructive dismissals are always considered unjust, once it is established that a constructive dismissal did occur, constructively dismissed employees are entitled to notice or, failing that, pay-in-lieu of notice just like any other wrongfully dismissed employee. Indeed all of the laws and provisions for dealing with wrongful dismissal apply to cases of constructive dismissal.

When your employment contract had been violated to the point where you have been constructively dismissed you are entitled to quit the job and treat it like you were dismissed without cause. This is why constructive dismissal is also sometimes called “quitting with cause”. It you do not quit your job within a reasonable timeframe of the changes you are effectively accepting the new terms of employment and have not been constructively dismissed. This is why if you have been constructively dismissed and wish to treat it as such it is best to quit as early as is feasible.

However, an opposite argument is that the employee has a duty to mitigate their damages by remaining in the job, at least until they find new employment. This is why it is essential to have the advice of a legal professional before making any decisions with respect to a constructive dismissal. It can be one of the trickiest legal swamps to maneuver through for an employee and requires expert guidance. The earlier you are able to involve a legal professional in the process the smoother it will go.

If you want to read more about constructive dismissal some of the relevant laws can be found in Part III Section 240 of the Canada Labour Code (as they relate to unjust dismissal). However, as it is a Common Law concept, there is no statute that specifically defines “Constructive Dismissal” in the Canadian context. It is therefore necessary to rely on case law. A good place to start to familiarize yourself with the concept would be the case of Srougi c. Lufthansa German airlines, [1988] F.C.J. Nº 539, which is considered authoritative.

The above is provided for informational purposes only and does not constitute legal advice, or the creation of a paralegal/client relationship between the author, Oracle Legal Services, and anyone who may read this article.

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