Common challenges

Best Practices to Avoid Constructive Dismissal Claims

September 08, 2021

Constructive dismissal occurs when an employer makes a significant change to the essential terms of an employee’s contract that is so intolerable the employee feels they have no choice but to resign in response. Since this resignation is the result of the change, it is not really voluntary and can be considered a termination. With the ongoing pandemic, companies have had to adapt very quickly to the changing environment. This rapid shift in priorities can lead to mistakes, some with severe consequences. Given the risks involved, how can employers avoid constructive dismissal claims?

Types of constructive dismissal and its causes

There are two types of constructive dismissal. The first occurs when there is a substantial one-sided change to the essential terms of employment. The second occurs when there is a series of actions that demonstrates the employer no longer intends to adhere to the employment contract. The most common causes of constructive dismissal claims are a result of changes to:

  • Job duties and responsibilities, including demotions;

  • Working conditions, including where work is performed; and

  • Compensation, including wages and benefits.

Poisoned or toxic work environments can also be grounds for constructive dismissal.

Constructive dismissal and returning to work

Is your organization planning to recall employees back to the workplace after working remotely? Hopefully you included that right in your remote work policy. If your remote work policy did not explicitly state you could recall employees and you make them return to the office, that could be grounds for constructive dismissal.

An employer needs to keep in mind that a constructive dismissal is essentially a termination by actions rather than words. The employer does not necessarily have to state that an employee has been terminated, but if their actions violate the existing terms of the contract, it can open a chance for constructive dismissal.

Repercussions of a valid constructive dismissal claim

As you can see, there are a wide range of scenarios that may be considered cause for constructive dismissal, and these claims can be costly for employers. If an employee sues their employer and the court determines constructive dismissal has occurred, the employee may be awarded a financial settlement. A recent Ontario Court of Appeal decision , for example, upheld an award of $1.27 million to a constructively dismissed employee. You want to avoid litigation, as losing can hurt your business financially, but even if the employee loses the case, merely being accused of constructive dismissal can hurt an employer’s reputation.

Guide to avoiding constructive dismissal claims

Employers have the right to make changes to the employment relationship, but must do so carefully and always act in good faith towards the employee. Constructive dismissal is a complex topic, and due to the individual nature of constructive dismissal claims, we strongly recommend that you seek legal advice before making any changes to the essential terms of employment.

As a precaution, following best practices guidelines can help you to avoid constructive dismissal claims. That is why our team of expert HR professionals has created a guide to avoiding constructive dismissal claims that outlines key aspects and focus areas that employers should keep in mind. Download the guide now for free!

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