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Constructive dismissal arises when an employer makes a significant change to an employee’s job without their consent, such as a substantial reduction in pay, a demotion, or creating a hostile work environment which effectively forces the employee to resign. It can also be a costly and disruptive for an employer. Under Ontario’s Employment Standards Act (ESA) and Common Law, the Courts treat such resignations as terminations, which may result in the employee being entitled to damages, notice, or severance.
Employers can protect themselves from these claims by understanding the risks and following best practices. Here are the top ten “don’ts” every employer should know.
- Do not Unilaterally Implement Major Changes Without Notice
Employers should avoid making significant changes to an employee’s duties, compensation, or working conditions without providing reasonable notice and securing the employee’s consent. Implementing changes unilaterally can easily give rise to a constructive dismissal claim. Open communication and planning are key. Employers should seek legal advice before making any major changes to an employee’s contract.
- Do not Reduce Compensation or Benefits Without a Written Agreement
Reductions in wages, hours, or benefits, even temporary ones, can be viewed as fundamental breaches of the employment agreement. Employers must seek written consent from the employee before making such changes, ensuring compliance with the Employment Standards Act, 2000 (Act) and the employment contract.
- Do not Demote an Employee Without a Legitimate Business Reason
A demotion that results in diminished status, compensation or responsibilities can constitute constructive dismissal unless there is clear, documented cause (such as ongoing performance issues). Employers should handle demotions with caution and seek legal advice when doing so.
- Do not Relocate Employees Without Discussion
Relocating an employee to a new location, especially if it significantly affects their commute or family life, may be seen as a substantial change to an employee’s terms of employment. If a mobility clause is included in the employment contract in Ontario, there may be flexibility, but obtaining written consent from the employee is strongly advised.
- Do not disregard a Hostile Work Environment
A hostile work environment, including harassment, bullying, or discrimination, can create conditions where an employee feels compelled to resign. Under Ontario law, employers have a duty to provide a safe and respectful workplace. Promptly investigating and addressing complaints is essential to avoid potential liability.
- Don’t Change Reporting Relationships Arbitrarily
Altering an employee’s reporting structure or department can affect an employee’s role and career prospects. Such changes should be clearly communicated to the employee, including the business rationale for the changes.
- Do Not Overlook Employment Contracts
A comprehensive and legally sound employment contract helps define the employment relationship and may allow for some flexibility in making changes. However, even with a well-drafted contract, major changes typically require notice or consent from the employee. Regularly review and update contracts to ensure they align with the ESA and current legal standards.
- Do Not Implement Sudden Changes Without Proper Planning
Sudden or unexpected changes such as adjustments to hours, duties, or compensation may damage trust and employee morale. Employers should develop a clear communication plan, provide reasonable notice, and engage in dialogue with employees to mitigate risk.
- Do Not Assume At-Will Employment Applies
In Ontario, unlike many U.S. states, the concept of “at-will” employment does not exist. Terminations, including constructive dismissals, require employers to provide reasonable notice or pay in lieu. Employers should understand their legal obligations under the ESA and Common Law and consult with a legal professional and plan accordingly.
- Do Not Avoid Seeking Legal Advice
Before making significant changes, it is prudent to consult with a legal professional in Ontario. Our Paralegal services can advise you on how to navigate complex legal requirements and avoid costly mistakes.
Examples of Constructive Dismissal
Common examples include:
- Reducing an employee’s salary or benefits without agreement.
- Allowing harassment or a hostile work environment to persist.
- Reassigning an employee’s role to the point where it no longer resembles the original position.
- Relocating an employee to a different office without appropriate discussion and support.
Conclusion
Avoiding constructive dismissal claims requires thoughtful planning, clear communication, and a solid understanding of Ontario employment law. By following these ten don’ts and consulting with legal professionals in Canada, employers can foster a respectful and compliant workplace, protecting both their business and their employees.
If you need assistance with drafting employment contracts, reviewing workplace policies, or managing changes to employee roles, contact us today for paralegal services and legal services in Ontario tailored to your needs.
The information provided in this article is for general informational purposes only and is not intended as legal advice. Readers seeking employment, legal advice, or paralegal services should consult with a qualified legal professional to obtain Employment Legal Advice customized to their specific circumstances. The authors and publishers of this article disclaim any liability for actions taken based on its content. For comprehensive support, consider trusted legal services in Canada.
Need guidance to avoid constructive dismissal claims? Contact HR Enable Inc. today at 905-483-5115 or samina.sial@hrenable.ca for expert support.