CONSTRUCTIVE DISMISSAL

Part 1

In a previous column, we discussed the situation of an employer dismissing an employee without cause. In such circumstances, the employer is obliged to provide notice of termination or pay in lieu of such notice.

Where it is not the employer who has terminated the relationship by terminating the employee, but rather the employee who has resigned or quit his or her job, an employer normally has no obligation to provide any notice or pay in lieu of notice. Certainly, where the employee resigns, for example, to take a better job or returns home to raise a family, for example, the employer has no obligation to give notice. Indeed, the obligation to provide reasonable notice in these circumstances rests with the employee.

But what is the situation where the employee resigns or contemplates resignation because of changes introduced by the employer to an employee’s working conditions or as a result of deteriorating workplace relationships? The Courts have long recognized that it is an implied term of every employment contract that an employer may not make substantial changes to the duties, status or remuneration of an employee, and that doing so strikes at the every root of the employment relationship. Where such is the case, an employee may be entitled to terminate the employment relationship by resigning and treating himself/herself as having been wrongfully or constructively dismissed.

The Courts have also held that an employer may not create conditions at work which require an employee to work in an atmosphere of hostility, embarrassment or humiliation. If faced with such a situation, the employee may consider themselves to have been constructively dismissed.

A resignation in the above circumstances, may permit an employee to bring an action for wrongful dismissal and seek damages for the losses sustained. However, not every change introduced by an employer nor any “problem” at work will permit an employee to sue for constructive dismissal. The Courts must determine whether the conduct in question constitutes a “fundamental breach or repudiation” of the employment contract. This is a legal question which requires an assessment of the employment contract and knowledge of legal precedent with regard to the changes introduced by the employer. Whether a change amounts to a fundamental breach will depend upon the extent and nature of the changes in question, the surrounding circumstances, and an assessment of the above, not from the perspective of the “injured” employee, but from that of a “reasonable” employee.

The existence at law of a constructive dismissal is premised upon the unilateral imposition of changes by the employer. An employee who accepts the changes or fails to object, will likely be held to have consented to the employer’s actions and will not be able to later say that he or she has been constructively dismissed. Similarly, where the employment agreement permits the employer to make such changes, the Courts are unlikely to conclude that they were unilaterally imposed by the employer.

Given the number of legal issues at play where constructive dismissal is involved, it is strongly urged that an employee, who is considering quitting in the face of changes in working conditions or a declining atmosphere at work, seek legal advice well in advance of any actual resignation. This is all the more important given that a resignation, where grounds for constructive dismissal cannot be established, will likely result in the extinguishing of one rights upon termination.

In Part II of this discussion, we will canvass some of the employment situations which the Courts have identified as giving rise to a constructive dismissal.

Part II

Previously, we discussed the situation where changes introduced by the employer to an employee’s working conditions would permit the employee to terminate the employment relationship by quitting his job and then treating himself/herself as having been wrongfully or constructively dismissed. This will almost certainly be the case where the changes involve substantial reductions to an employee’s responsibilities, authority and/or remuneration. Such changes may involve reduction in salary or hourly wage or pay freezes, reduction in working hours, loss of existing additional remuneration such as bonuses or commissions or benefits, reduced responsibilities such as loss of management or supervisory functions, more onerous duties, reduced advancement opportunities, and forced retirements where no mandatory retirement policy was in place at the time of hire.

The difficulty in applying the law of constructive dismissal lies in determining where the Courts will draw the line between changes which constitute “a fundamental breach” of the employment contract and therefore constitute a constructive dismissal and those which do not. An employee contemplating quitting under any of the above circumstances is well advised to seek out legal advise beforehand given the serious consequences which will flow where an individual has resigned under the mistaken impression that he or she has been constructively dismissed.

As we previously pointed out, a constructive dismissal may also be found where an employer by its dealings with an employee has created a situation where it would be unreasonable to expect the employee to continue in employment. There are two fact situations which will give rise to a constructive dismissal in the these circumstances: in the first instance, the employee is engaged in a personality clash with a supervisor or co-worker and the conduct of the supervisor or co-worker is such that continued employment becomes intolerable. In the second instance, a constructive dismissal may occur where discipline is imposed for poor or substandard performance and such discipline is not warranted in the circumstances.

With respect to the former situation, the Court in Saunders v. Chateau Des Charmes, found that the plaintiff had been constructively dismissed where he was exposed to hostile, aggressive, profane, rude, demeaning and intimidating behaviour from his supervisor. Over time, the supervisor’s conduct escalated and the plaintiff suffered additional verbal attacks. While the Court recognized that the plaintiff may not have been performing as expected, managers are not permitted to discipline employees in the manner the plaintiff had experienced. On these grounds, the plaintiff was found to have been constructively dismissed.

The conduct of a co-worker may also result in a constructive dismissal. In Stamos v. Annuity Research and Marketing Service Ltd., the employer’s failure to intervene where the plaintiff had been subjected by a co-worker to verbal harassment, unjustifiable attacks on her performance, unreasonable demands, sexist and bigoted language, and hostility towards her as a woman, led to a finding of constructive dismissal.

Chambers v. Axia Net Media Corp. is a case of constructive dismissal arising in the context of unwarranted discipline. There, an employee of 14 years who had previously been placed on probation for poor sales performance was advised that his probation was being extended for a further twelve months and warned that he could lose his job if his performance did not improve. The warning letter further indicated that failure to meet job requirements could result in termination at any time during the probationary period. Upon receiving the letter, the employee took the position that he had been constructively dismissed and resigned his employment. The Court concluded that while the employer had acted reasonably in setting performance standards, warning of poor performance, and placing the employee on probation, it constructively dismissed the employee when it advised that the employee could be terminated for poor performance at any time before the probationary period was completed. As the Court indicated, where an employer gives an employee an opportunity to correct shortcomings in his job performance and the employee accepts the offer, it is not open for the employer “to give, on the one hand, and take away with the other.”

The above cases demonstrate situations where constructive dismissals were found, but ought not to be relied upon as determinative of other, even similar fact situations.

Where an employee is faced with a legal issue in the employment contract, including a constructive dismissal situation, one should obtain independent legal advice.