For an employee, a constructive dismissal is very hard to prove. For an employer, a constructive dismissal case can be an expensive litigation disaster. The Supreme court set out in Farber vs. Royal Trust Company that a Constructive dismissal occurs when an employer substantially alters, without an employee’s consent, an essential term of the employee’s contract of employment. An objective assessment of the employer’s action is required. .

How does a Court look at whether an employee has been constructively dismissed?

To reach a conclusion that an employee has been constructively dismissed, the courts must determine whether the unilateral changed imposed by the employer substantially altered the essential terms of the employee’s contract of employment. For this purpose, a judge must ask whether, at the time the offer was made, a reasonable person in the same situation as the employee would have felt the essential terms of their employment contract were substantially altered. The fact that an employee may have prepared to accept some of the changed is not conclusive, because there might be other reasons for the employee willingness to accept less then what she or he would have been entitled to.

Therefore, what we do as lawyers is analyze whether a particular employer initiated change amounts to constructive dismissal by a three part test:

1. we must determine the terms of the contract between the parties (which may or may not be a hard copy contract, or good be an oral agreement);

2. we try and determine whether the employer has breached any of these terms; and

3. determine whether the breach is a fundamental one, entitling the employee to consider that his contract has been repudiated or severed.

What changes therefore amount to constructive dismissal?

Changes that go to the root of the contract are fundamental changes are changes. For example:

A. changes in remuneration, remuneration is at the heart of the bargin between your company and your employees. Most reductions and salary will amount to constructive dismissal. In Farber vs Royal. Trust ,  constructive dismissal occurred when the basis of the plaintiff’s remuneration from a combination of salary + commissions to strictly commission amounted to a constructive dismissal. An employer must be very careful because in most incidents, changes to an employee salary, including alteration of the basis for calculating remuneration will amount to constructive dismissal. Do not do this without consulting a lawyer.

B. changes to benefits, where payments under a bonus plan is discretionary, alterations to the bonus entitlement have been found not to amount to an alteration to a fundamental term of the contract. On the other hand amendments to non discretionary bonus plans (which mean a decrease in the employee’s bonus entitlement) are often treated the same way as alterations to salary. In most instances such alterations will constitute constructive dismissal, excluding minor changes to benefit plans that are not a significant. In essence, significant changes to benefits or remuneration are likely to be viewed as fundamental.

C. changes in your employee work hours – a slight variations in hours are permissible, unless is could be inferred that the parties had agreed to particular working hours. In the case of Laakso vs, valspar the plaintiff was transferred from dayshift to shift work. The plaintiff was medically incapable of working nights and in these circumstances the unilateral change in hours was found to constitute constructive dismissal.

D. changes in work locations – until recently the Ontario case law supported a conclusion that relatively senior employees and large organizations were required to accept transfers in locations. However several years ago in the court of appeal case of Reynolds vs. Innopac Inc., as a result of a corporate reorganization, the plaintiff, a director of human resources, was required to relocate from South Western Ontario to Vancouver. The court found that this would have necessitated increase travel for the plaintiff as he would have been required to service plants in South western Ontario. His duties also might have been altered slightly in Vancouver. When he was originally hired the plaintiff was required to travel only in Ontario as the employer had no operation else where. The trial judge found that there was no constructive dismissal arising from this relocation request; however this decision was overjourned by the court of appeal who found that the relocation requirement amounted to a fundamental change entitling the plaintiff to a two year payment provided in his golden parachute termination clause. This decision is not confined to its particular facts it significantly alters the impact of relocation requests.

E. changes in job status – the courts have long decided that job reassignment amounting to any type demotion would constitute a constructive dismissal. The courts also have recently undercut management rights to affect lateral transfers. Now dispite nothing inheriting demeaning about lateral work transfers being offered or remuneration packages had to be unchanged, the court of appeal has held that lateral changes do constitute a breech of employment agreement and damages have been awarded for this unilateral breech.

F. a difficult work environments or humiliating treatments, or bulling – this is an area that must be addressed immediately and brought to an employer’s attention. There should be no instances of harassments tolerated in a work place and any criticisms, dishonesty, assault or bulling, humiliating treatment or insult must be properly addressed by management without delay. A seminal case in this area is Shah vs. Xerox Canada limited. In this case the plaintiff had received several good performances evaluations. He was a good employee who always arrived on time and did his work dutifully. A new manager was hired and soon he and that new manager developed personality conflicts between each other. The manager criticized him for minor matters and that plaintiff immediately addressed the issues raised but non the less reserved stern warnings. The plaintiff soon became ill and took time off and when his relations with his manager deteriorate further the plaintiff was assigned to several new tasks. These tasks were, as the plaintiff put old tasks that others have failed to accomplish. The plaintiff that therefore felt that deadlines listed on the forms was unreasonable. He then received more stern warnings. The plaintiff ended taking a stress leave; he returned to work and then was placed on probation to failing to properly call in sick one day. Upon receiving another letter placing him on probation the plaintiff resigned and claimed he was constructively dismissed. The court of appeal noted in this case where “where the conduct of management personnel is calculated the cause the employee to with draw from the employment it may amount to constructive dismissal”. The test is objective. It is whether the conduct of the manager was such a reasonable person in those same circumstances should not be expected to persevere in the employment. Each case must be decided on its on facts and this test of the reasonable person should not be applied lightly. An employer is entitled to be critical of the unsatisfactory work of its employees and take measures, such as disciplinary measures or other measures it believes to be appropriate to remedy the situation. However there is a limit and if the employers conduct in the particular circumstances pass so far beyond the bounds of reasonableness, that the employee reasonably finds continued employment to be intolerable there will be constructive dismissal.

The court of appeal up held this approach and confirmed that constructive dismissal may occur through a series incidents such as repeated unfounded criticisms, which create a hostile embarrassing work environment. A fundamental breech of the terms of the employment contract may exist where their environment is rendered “intolerable”.

Conclusion

A company that is contemplating changes to an employees status, compensation, territory, work location, hours of work, changes to benefits should consider several factors in order to avoid an employee to convincing law suit in constructive dismissal. Firstly give proper notice of the change that your company intends to make. Any employment contract can be terminated with cause or reasonable notice. If an employee has received written notice of the projected changes and that employee refuses to accept changes her or she may not be entitled to claim a constructive dismissal. In the case of Fellowes-strike vs. Co-operators group limited it was held that an employer is impliedly entitled under the employment contract to unilaterally change an employees job duties as long as it gives the employee reasonable notice. Therefore you should firstly determine what the reasonable notice would be before you give notice of the purposed change to your employees working conditions. If you provided proper notice of the change an employee is then obligated to look at the new position offered and evaluated as a means of medicating damages. Generally however the courts of applied this quiet narrowly, therefore it is important that you contact proper counsel to examine written notice of the purposed changed.

Constructive Dismissal claims are also less likely to succeed if the company was undergoing restructuring or reorganization of the company. An employer is entitled to protect its own interests and if an employer has to realign employee responsibilities their position to protect its own financial interests and conditions than that company will most likely be aloud to do so. Also, it is important to draft proper agreements of employment when the company hires an employee. If you are employment contracts or particularly guarded to anticipate any sort of changes allowed by contract then it is most likely that those changes will be allowed.

I often advise employers that it is important employee as informed as possible through management. The worse thing an employer can do is keep an employee in the dark concerning any projected changes that maybe made. An employer should properly consult with counsel with respect to any fundamental changes that maybe incorporated into the employment relationship and properly plan for those changes. There is a duty both on the employer and employee to remain within the sculpt of the employment agreement, and therefore changes outside the perimeter of this contract are often not welcome. However, if these changes are approached carefully and with precision (outside the obvious reasons of reorganization or restructuring or merger) then those changes could be dealt with outside any possible commencement of litigation. An employer will often see that if it approaches any fundamental changes of the sculpt of the employment contract with a caring concern for the employee, it will be much easier to deal with those changes and more often than not an employer will receive the employees consent.

If you are an employer that requires to unilaterally change the fundamentally scope of an employment contract or employment relationship and need proper consultation please do not hesitate to contact Matt Lalande at 905-639-8894.

If you are an employee that believes that your contract or employment that has been substantially changed without your consent and you do not agree with such change please do not hesitate to contact Matt Lalande at 905-693-8894.

Matt Lalande
Haber & Associates
905-639-8894
www.haber-lawyer.com