Constructive Dismissal

An employee can be constructively dismissed if the employer changes a significant term of the employment without the consent of the employee. This does not mean that any change in the terms of employment constitutes constructive dismissal. Employees must expect reasonable disruptions in employment and are not entitled to a job for life in the place of their choice.

The doctrine of constructive dismissal is based on the principle that once a verbal or written contract of employment has been formed, neither party has the right to unilaterally change a significant term of that contract. Therefore, if the employer does make substantial changes to essential terms of the employment contract, the employer may be deemed to be terminating that contract. In such cases, if the employee leaves, he or she may be entitled to receive compensation for wrongful dismissal.

In order to determine whether an employee has been constructively dismissed, the court looks at a number of factors. One of the things that a Judge considers is whether an objective, reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed. It is not necessary to show that the employer acted in bad faith or intended to force the employee to leave.

Courts have found constructive dismissal where the employer has significantly decreased wages to the employee, made large changes in job content, working conditions, or transferred the employee to another geographical region. A small reduction in wages together with a demotion may also constitute constructive dismissal.

In addition, Courts do take note of whether the job change was made in good faith and in the best interests of the company. Such changes are unlikely to form the basis for a successful claim for constructive dismissal. Companies are allowed to make changes as long as they are genuine business decisions which are not calculated to denigrate or undermine the employees. Employees have no property rights to a particular set of job functions. An employer is not locked in to any particular arrangement with the employee. An employer is entitled to alter the employee’s duties to meet the needs of its business.

It is important to distinguish resignations from constructive dismissal. The essential element of a resignation is that it is voluntary. The employee makes the decision to leave. The reasons why are not as important as the fact that it is the employee who has voluntarily decided to end the employment relationship. However, a resignation submitted only in response to unfair actions taken by the employer, is in effect, a constructive dismissal.

To establish grounds for a finding of constructive dismissal, there must be evidence that the changes made by the employer put the employee in the position of having to accept, as a condition of continued employment, substantial changes to wages, or working conditions, or benefits which a reasonable person, informed of all the facts, would find to be unreasonable and unfair.


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