When is it constructive dismissal? Some answers

A working  career, like life, is full of change and transition. Nothing ever stays the same for long. 
Not all changes to the terms of one’s employment are welcome. I am routinely asked the question, “In what circumstances can I reject the change imposed by my employer, walk out the door and sue for wrongful dismissal?”
A constructive dismissal occurs when the law deems that someone has been terminated without anyone ever saying, “You’re fired!”
Employers have the right to make any changes they want to the terms of employment so long as any big changes come with reasonable advance notice. What is and is not reasonable notice depends on an employee’s age, level of responsibility and seniority.
Let’s imagine that Bob has been an office manager for 10 years, supervising 5 other employees.  Let’s agree that if he was terminated, the law would require him to be given either 8 months notice during which he would continue to work or 8 months pay in lieu of that notice.
If the employer wants to demote Bob to accounts receivable clerk and cut his wages by 20%, it can do so. Unless it is happy to pay out a severance package, however, the employer should be careful how they manage this transition.
If the employer simply tells Bob that the following week he is the accounts receivable clerk, with reduced wage, Bob can leave at the end of the week, sue for wrongful dismissal and be awarded up to 8 months lost wages if he cannot find work during that time.
If, however, the employer tells Bob that 8 months from now he is being demoted to the accounts receivable position, Bob has few choices.
He can always walk out the door if he wants, but he will get nothing but his last paycheck: The employer gave him advanced notice. Alternatively, Bob can work the next 8 months in his office manager position and walk out the door then. The employer, however, will owe him nothing more than his wages. The employer gave Bob advanced notice of the change commensurate with his age, seniority and level of responsibility.
Think of it this way:  If the employer has the right to tell Bob that he is terminated in 8 months and owe him nothing after that period is over, by the same token, it has the right to tell him that he is being demoted in 8 months. What the employer is really saying is that Bob is being terminated from his present position in 8 months, but there is a new job available for him following that, if he wants it.
The problem, of course, is that Bob’s example is very easy. There is no question that  if somebody is demoted and their wages reduced, that constitutes a significant which requires reasonable notice.
But what if the employer is not demoting Bob, but is reducing his wages by 8% as a result of a business downturn? Suddenly, things are not so clear. Bob may very well receive advice from an employment lawyer that that change alone is not a constructive dismissal.
What if Bob is told that his wages and title will remain the same, but starting next week he is supervising only one employee and not 4, because they are being assigned to someone else? A significant demotion without reasonable advance notice can constitute a constructive dismissal, but Bob better get advice before he jumps ship.
Employers need to know that if they are dragged before the courts in a constructive dismissal case, the motivation for the changes will have little importance. The court does not really care that the business felt it had to make changes quickly and without notice for legitimate business reasons. Nor does it care if structural changes across the company affected lots of people and not just Bob. Employers are expected to anticipate changes in business conditions and give employees advance notice of any significant changes to the terms of their employment.
While employment contracts are often not reduced to writing, they are still contracts. An employer’s account manager at the bank will not accept the employer simply telling it one day that it has decided to suspend debt repayments because of business reasons. It’s a breach of the contract. The same applies to employees. They have contracts too.
Having said that, regardless of what the law would say, unless change imposed by an employer without notice is significant or humiliating, employees should try to think about the long term and consider rolling with the punches. A successful career over the long haul often means accepting that nothing is as constant as change.
As published in the Hamilton Spectator, January 22, 2005.
Ed Canning
Ed Canning
P: 905.572.5809