CASUAL LEGAL: Constructive Dismissal – A Refresher

Attention: AMSC Members – Please distribute to all appropriate personnel

Constructive Dismissal – A Refresher

By Anthony Purgas

Reynolds Mirth Richards Farmer LLP

AMSC Casual Legal Service Provider

With a number of changes coming in workplaces throughout Canada and Alberta as a result of dramatic changes to the economy, there has been a renewed focus on the legal concept of constructive dismissal. In this article, we will cover what it is, what is the effect if it occurs, and how to avoid it.

Constructive dismissal occurs where, although an employer does not expressly dismiss an employee, the law considers the employment relationship to have been terminated by the employer. There are two circumstances where this may arise: (i) first, the breach of an express or implied term of the employment contract, of such seriousness to amount to constructive dismissal (for example, not paying an employee); and (ii) second, arising from conduct of the employer demonstrating that it no longer intends to be bound by the terms of the contract (for example, arbitrarily not allowing the employee to come to work).

The test in determining whether constructive dismissal occurs is whether a reasonable person, in the same situation as the employee, would feel that the essential terms of their employment contract were being substantially changed without their consent. This can arise through a reassignment, a reduction of wages or other compensation, or an unaddressed toxic workplace situation, among others. However, it is important to understand that determining the existence of constructive dismissal is highly fact-dependent, and similar conduct could be considered constructive dismissal in some situations and not in others.

If there is a constructive dismissal, then the employee can elect to treat their employment as terminated and bring a lawsuit for wrongful dismissal, or continue working but bring a lawsuit for damages suffered as a result of the employer’s breach of contract. For employees with long service, such lawsuits can result in significant damages and legal costs payable by the employer.

The most effective way to prevent constructive dismissal from occurring is to get employees to agree to any changes in their employment, including changes to wages or job positions. If the employees do not agree, an employer may still be able to avoid a constructive dismissal claim by giving sufficient notice of any changes to workplace conditions and contracts; the length of notice depends on the nature of the changes and the characteristics of the employee or employees affected. Finally, any unilateral changes should be carefully considered to ensure they are as reasonable and minimize impact as much as possible.

To access AMSC’s Casual Legal Helpline, AUMA members can call toll-free to 1-800-661-7673 or email casuallegal [at] amsc.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] auma.ca, or call 310-AUMA (2862) to speak to AUMA’s Risk Management staff. Any Regular or Associate member of the AUMA can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.