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Constructive Dismissal in Canada: Know Your Rights
Constructive dismissal is an essential legal concept in Canadian employment law that employers and employees must understand thoroughly.
This guide will explain crucial details about constructive dismissal, including definitions, differences from wrongful dismissal, steps to take, your rights and entitlements, how employment contracts factor in, consequences for employers, and key takeaways.
What is Constructive Dismissal in Canada?
Constructive dismissal, or constructive discharge or termination, occurs when an employer makes substantial unilateral changes to the fundamental terms of an employee’s employment contract without their consent.
These significant modifications made solely by the employer render the employee’s working conditions so intolerable that the employee feels compelled to resign involuntarily.
Despite the employee being the one to formally quit, the law still considers this to be dismissal illegally initiated by the employer’s actions. Some examples of changes that could lead to constructive dismissal include:
- Demotion or significant reduction in compensation
- Major changes to job duties, responsibilities, or reporting structures
- Relocation to a distant workplace or one that causes considerable hardship
- Shift changes that do not accommodate family or health needs
- Allowing an unsafe or harassing work environment to persist
- Suspensions or layoffs exceeding statutory limits
Essentially, constructive dismissal can occur when an employer makes unilateral changes that substantially and detrimentally alter the essential terms agreed upon in the original employment contract. Even if the employer claims alterations are temporary or tries to obtain retroactive consent from the employee, this may still legally constitute constructive dismissal.
Key Differences Between Constructive Dismissal and Wrongful Dismissal
While constructive dismissal arises from substantial unilateral changes imposed by the employer, wrongful dismissal refers to an outright termination directly initiated and imposed by the employer. This termination breaches the terms of the employment contract or violates established employment standards.
| Constructive Dismissal | Wrongful Dismissal |
| Arises from substantial unilateral changes made by the employer | Direct termination initiated by the employer |
| Employer’s actions compel an employee to resign involuntarily | Employer directly severs employment relationship. |
| Employee is coerced into quitting | Clear, outright dismissal by employer |
Although the processes differ, constructive and wrongful dismissals are treated as illegal termination under the law, entitling the employee to compensation.
What Should You Do if Facing Potential Constructive Dismissal?
If you are an employee facing a situation that could lead to constructive dismissal, it is crucial to respond carefully and professionally to protect your rights:
- Don’t quit immediately: Resigning outright due to substantial unilateral changes could weaken any potential constructive dismissal claim. First, speak to an employment lawyer.
- Communicate concerns to your employer: Professionally express any grievances concerning substantial detrimental changes imposed on your employment terms or environment. Do so in writing to create a record.
- Review your employment contract: Check for any clauses that may alter your rights and severance eligibility in constructive dismissal situations.
- Document everything: Keep detailed records of all communications, changes, interactions, and events related to the situation. These help support your claim.
- Consult an employment lawyer: Legal guidance is highly recommended before taking any formal action. An expert lawyer can properly assess your situation and rights.
Severance Pay and Damages in Constructive Dismissal
If you resign involuntarily due to constructive dismissal, you are legally entitled to the same severance pay and damages as if you were fired outright without cause.
Severance pay is meant to provide compensation for loss of employment. The amount of severance pay owing is calculated based on various factors, including:
- Age
- Length of employment
- Salary and benefits
- Commissions and bonuses
- Pension eligibility
- Availability of similar employment
Under the ESA, the minimum statutory severance entitlement ranges from 1 to 26 weeks’ pay. However, common law courts often award much higher damages, in the range of 18 to 24 months’ compensation, if warranted by the circumstances.
An experienced employment lawyer can help determine precisely what severance pay and damages you are rightfully owed based on your particular situation and the details of your case. You can also use a severance calculator to obtain a rough estimate.
In addition to lost income, you may be entitled to claim substantial damages related to mental distress, humiliation, lost dignity and other consequences arising specifically from the constructive dismissal itself.
How Employment Contracts Affect Constructive Dismissal Cases
The terms of your employment contract play a pivotal role in constructive dismissal cases. Contracts often contain termination clauses and restrictive severance provisions that can limit employees’ rights.
However, for such limiting clauses to be legally valid and enforceable, they must meet several strict conditions:
- Provide at least the minimum statutory entitlement for termination notice or pay
- Adhere to very precise technical drafting requirements
- Offer adequate consideration (value) in exchange for any waived rights
Unfortunately, many employment contracts are not properly drafted or have deficiencies that render restrictive severance clauses wholly unenforceable.
That’s why having an experienced employment lawyer thoroughly reviews your employment contract is critical. They can analyze the fine print to determine if any provisions unlawfully infringe upon or limit your rights to claim common law severance pay or seek damages in a constructive dismissal case.
Best Practices for Employers to Avoid Constructive Dismissal Risks
While employees need to know their rights, employers also want to avoid constructive dismissal situations arising in the first place. Here are some best practices for employers:
- Communicate clearly with employees about any substantial workplace changes and the underlying reasons behind decisions.
- Create and consistently follow written policies on issues such as harassment, discrimination, discipline, termination, severance, etc.
- Promote open and empathetic two-way dialogue and be receptive to employee concerns.
- Provide management training on communication, leadership, conflict resolution and performance management.
- Respect employees’ work-life balance needs and be flexible where possible.
- Foster a collaborative, inclusive work culture based on mutual trust and respect.
- Regularly review employment contracts to ensure they reflect current standards and workplace practices.
- Proactively seek guidance from employment lawyers when implementing new policies or before making substantial changes.
Potential Legal and Financial Consequences of Constructive Dismissal
Mishandling constructive dismissal situations can carry major detrimental consequences for employers:
- Substantial legal liability for wrongful dismissal, severance, damages and injury to dignity claims
- Significant financial payouts to settle claims and lawsuits
- Reputational damage within the industry and difficulty attracting talent
- Plummeting employee morale, higher turnover, and reduced productivity
- Major legal expenses related to proceedings and settlements
- Regulatory fines for violating employment standards
Key Summary Takeaways on Constructive Dismissal in Canada
- Constructive dismissal occurs when an employer unilaterally makes substantial detrimental changes to an employee’s job, forcing them to resign involuntarily.
- Employees facing constructive dismissal should get legal advice before quitting and communicate concerns professionally.
- Like wrongful dismissal, constructive dismissal entitles employees to severance pay and potential damages.
- Employment contracts can influence constructive dismissal cases and severance eligibility. Have an expert lawyer review your contract.
- Employers should focus on open communication, fair policies, and a positive culture to avoid constructive dismissal liability.
- Mishandling constructive dismissal situations poses major legal and financial risks for employers.
In summary, constructive dismissal is a nuanced but crucial legal concept in Canadian employment law that employers and employees must fully understand, especially regarding rights and obligations when navigating substantial workplace changes. With proper guidance from experienced employment lawyers, many constructive dismissal situations can be avoided or equitably resolved.
FAQs on constructive dismissal in Canada
How do I know if I'm being constructively dismissed?
Look for substantial unilateral changes by your employer that alter your job negatively, like demotion, pay cuts, loss of benefits, changed duties or hours, unsafe conditions, etc. Changes must be imposed without your consent.
Should I keep working during constructive dismissal?
Don't resign right away. Keep working but get legal advice on your rights and document issues. Continuing to work doesn't mean you accept the changes.
Does constructive dismissal only apply to certain jobs?
No, constructive dismissal law applies to all employees regardless of occupation or seniority, as long as qualifying changes are made by the employer.
What steps should I take before resigning?
Before resigning, speak to an employment lawyer, gather evidence of changes, raise your concerns to the employer, review your contract, and consider negotiation.
Can my employer sue me if I claim constructive dismissal?
It's uncommon for employers to countersue in these cases. But they may allege cause for dismissal or that no constructive dismissal occurred.
What are some alternatives to resignation?
Instead of resigning, consider requesting reversed changes, remediation of issues, a transfer, mediation, or amended contract terms.
Article Sources
Constructive Dismissal in Canada: Know Your Rights
Ben Nguyen