What is Constructive Dismissal?

1. Preliminaries

The area of constructive dismissal is highly technical, and requires specific legal expertise in this area of the law. There is a significant proportion of constructive dismissal cases that fail for the plaintiff at trial. Therefore, having read the materials presented here, if you feel you have suffered a constructive dismissal, then it is imperative that you immediately contact a wrongful dismissal lawyer and place the facts before him or her. If you feel you need to act, then please fill out and answer this questionnaire and submit it to info@dismissal.ca for review and follow-up to you, and begin to take steps to retain and pursue your rights.

2. A Basic Primer in Contract Law

Basic to employment law is the law of contract. This is so because each employment involves a contract of some sort, either verbal, written or a combination of verbal and written, between the employer and the employee. Every contract contains features of the overall agreement, known as terms. Some terms are fundamental to the contract, and some are merely supportive but not necessarily fundamental. A fundamental term is a term that is so important and basic to the functioning of the contract that to change or eliminate it would act to destroy the contract. An example of a fundamental term in a typical employment contract is pay in all its forms. Another likely fundamental term in many employment contracts is duties, title or job function. Another likely fundamental term in many employment contracts is hours or days of work.

Another principle of contract law is the law of bargain. In order to make a change of a fundamental term in a contract, the agreement of both parties to the contract, (in the case of employment the parties are the employer and the employee), is required.

3. Constructive Dismissal

What is a constructive dismissal? A constructive dismissal occurs where one party to the contract, typically the employer, unilaterally changes, to the extent required at law, a fundamental term or terms of the contract. For the employer to act unilaterally means that the employer made the change and put it into effect without the agreement of the employee. Where a constructive dismissal occurs, usually, it is the case that the change made by the employer is not to the benefit of the employee. Once the employer breaches a fundamental term as described above, they are in fundamental breach of the contract in total, and the law considers that the employer has repudiated (or rejected) the contract, and the employee is entitled to accept the repudiation, bringing the contract to its end. Once the employee accepts the repudiation, the employment contract is ended and the employee is then allowed to pursue the employer in damages for the breach. Damages for such breach are usually calculated in terms of the reasonable notice set out in the common law.

A very common form of constructive dismissal is related to a reduction in pay. For example, a constructive dismissal occurs where the employer unilaterally imposes on the employee a reduction in pay (whether it be salary, commissions, non-discretionary bonus, or other less obvious elements of total pay) that amounts to a breach of the fundamental term, since pay is a fundamental term of virtually every employment contract. The threshold at common law for determining at what point the employer crosses the line from a mere breach to a fundamental breach is determined, in the case of pay reductions, primarily by the scope or proportion of the pay reduction imposed. A minor reduction in pay may still result in a claim for damages, as long as there has been a history of protest.

Change of title or duties is another area likely to produce a constructive dismissal. Where an employer acts to change or reduce title, duties, hierarchical standing within the employer, reporting functions, and such, there is likely a potential constructive dismissal in the making.

4. Time is of the Essence

The employee should be aware that with constructive dismissal fact patterns, a clock is ticking. Depending on the nature and duration of the employment, the clock could run out quickly. Within the law of constructive dismissal is the doctrine of condonation. An example. Let’s say the employer suddenly reduced the employee’s pay by 25% unilaterally. At that point, it is probably safe to conclude the employee has been constructively dismissed. However, let’s say that for whatever reason, the employee continued to work under the new conditions at the lower pay. Where the employee continues to work under the new conditions, at some point, depending on the factors relating to that particular employment, the law will conclude that the employee condoned, or agreed with the change in pay, and a new term in the employment contract, incorporating 25% less pay, came into existence. At that point the law will prevent the employee from making any claim for constructive dismissal. The clock stopped ticking in that case. Therefore, time is of the essence.

Therefore, if you are an employee faced with a pattern that appears to be a constructive dismissal you should immediately place the facts in front of and seek legal advice from a wrongful dismissal lawyer. If you feel you need to act, then please contact us or fill out and answer the questionnaire and submit it to info@dismissal.ca for our review and follow-up to you, and begin to take steps to retain and pursue your rights.