Constructive Dismissal—When Resigning May Actually be Wrongful Dismissal

Wrongful Dismissal by Employer -- Employer Playing with Employee on puppet strings

A constructive dismissal occurs when an employer substantially changes the terms of an employee’s contract of employment which the employee does not consent to, either explicitly or implicitly. In this situation, the employee may be able to treat the employment contract as being at an end, which entitles the employee to notice from the employer as if the employee had been terminated.

Employer Actions that Constitute Constructive Dismissal

For a constructive dismissal to occur, the employer must act in a way that changes the fundamental terms of the employment relationship are changed. Such actions might include:

  • The employer demoting an employee or reducing the employee’s remuneration;
  • The employer refusing, by words or conduct, to allow the employee to fulfill the conditions of employment (such as locking an employee out of a building or removing support staff);
  • The employer harassing or abusing an employee; or
  • The employer giving the employee the choice of accepting the fundamental change or being fired.

By such types of action, employers essentially cease to meet their obligations and are therefore terminating the employment contract. Employees can therefore treat the contract as fundamentally breached and consider themselves as being dismissed through the employer’s actions.

Obtaining Relief from Constructive Dismissal

Even in the presence of such conditions as those mentioned above, constructive dismissal must also be accompanied by certain actions by the employee. The employee would generally have to object to the substantial changes or incidents within a short period of time of their occurrence. It is not recommended that an employee resign without first obtaining legal advice. However, if the employee does resign, the employee must make it clear to the employer that the resignation is due to the substantial change or incidents.

If the employee does not make it clear to the employer that they do not accept the new terms, then the employee may be seen as having agreed to the changes made. Additionally, employees may not be able to claim constructive dismissal if, for a period of time, they act in accordance with the changes made to their employment. This would be considered implied acceptance and may provide a basis for believing that the employee is in agreement with the unilateral changes. If the employee later becomes dissatisfied with the new terms and conditions of employment, they may not be successful in a claim for constructive dismissal.

The Employee’s Duty to Mitigate

In both wrongful and constructive dismissal situations, the employee has a duty to mitigate damages by seeking new employment. In most cases, the employee may not be required to continue working for the employer who constructively dismissed the employee.

An employee would, however, be expected to return to work for the dismissing employer in an effort to mitigate damages if:

  • the former employer offers temporary, comparable employment;
  • there are no conditions that make such a return to work unreasonable or intolerable; and,
  • a reasonable person would accept such an opportunity

For related case studies and more information on Constructive Dismissal and Wrongful Dismissal, search our blog.

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