BC Employers: How to Avoid a Constructive Dismissal Claim

Employers in BC should understand what constitutes constructive dismissal so they can take steps to protect their business from a potential claim and the related reputational consequences.

Constructive dismissal occurs when an employee feels they have no choice but to quit their job because an employer has unilaterally changed the terms of the employment agreement, or the workplace has become intolerable.

Employees who believe they have been constructively dismissed may pursue a wrongful dismissal claim. If the court finds that there has been a breach of a fundamental term of the employment contract, the employer may be considered in violation of the entire agreement and, therefore, liable for damages as if the employee has been terminated without cause. Damages are calculated as reasonable notice period as set out in common law, or as defined in the employment contract.

There are two main types of constructive dismissal. The first involves a workplace that has become so toxic due to bullying, harassment, or other inappropriate behavior, that the employee feels that working there is intolerable. The second type of constructive dismissal occurs when there has been a significant change to the fundamental terms of the employment contract such as:

•            A demotion, change in title or loss of status/prestige or change to reporting relationships
•            A change of responsibilities, such as the removal or decrease of duties
•            A pay cut or a reduction in hours, commissions, benefits, bonuses, etc.
•            A significant change to work location or hours

More subtle forms of constructive dismissal could include:

•            Undue criticism or demeaning treatment
•            Being continually passed over for promotions or raises
•            Failing to receive adequate job support
•            Exclusion from projects or other team initiatives

How to reduce your risk

There are steps that employers can take to reduce the risk of a constructive dismissal claim. The first is to maintain a respectful and professional work environment. Employers must take reasonable steps to prevent or minimize workplace bullying and harassment, such as developing a harassment policy statement that outlines a procedure for preventing unprofessional behavior and managing complaints.   

When making changes that affect the employee’s role, responsibilities, and terms of work, ensure that you are making these changes for clear business reasons and that you communicate your rationale to the employee before implementation. Allowing employees an opportunity to seek clarity and provide input may ease the transition.

It is important to ensure that the employee’s new role, and related compensation, are comparable to their current position. It is ideal to confirm this change in writing and have the employee sign off on it in advance. However, if, for business reasons, you must make a change to the employee’s role that is not commensurate with their current role, you must provide your employee with reasonable notice of the change.

Seeking legal advice early in the process can help you take pre-emptive steps to prevent a claim from arising. It is also valuable to review your employment contracts and plan to include terms enabling you to change duties and pay structure should the need arise.

Why you should have a policy manual

A policy manual can outline workplace rules that a broader-reaching employment contract may not include. Referencing a policy manual within the employment contract can give employers increased flexibility to make ongoing changes that control the daily activities in the workplace. A policy manual can communicate details of the employment relationship, such as:

•            Standards of conduct
•            Confidentiality and data protection
•            Bullying and harassment policies and reporting procedures
•            Overtime
•            Vacation and benefits
•            Safety procedures

Risks of COVID-19 and Return to Work

Many employers implemented work-from-home policies in response to COVID-19, expecting employees to transition back into the workplace as the pandemic eased. Instead, however, some employers have found employees unwilling to return to the office.

If an employee was hired during the pandemic, or if there was no COVID-19 policy or written employment agreement setting out long-term expectations, requiring a return to the office could trigger constructive dismissal.

Employment lawyer, Kimberly Pavao, can help you understand your obligations regarding constructive dismissal.

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