When most people think of being dismissed from a job, they imagine being formally fired or laid off. However, under Canadian employment law, including in Alberta, there is another way an employee can be effectively terminated: constructive dismissal. Unlike a conventional termination, constructive dismissal occurs when an employer makes a significant unilateral change to the essential terms of the employment contract without the employee’s consent—effectively forcing the employee to quit. In the eyes of the law, this is treated as a termination, and employees may be entitled to severance or damages.
At Shim Law in Calgary, we regularly assist employees and employers in navigating constructive dismissal claims. Understanding what constitutes constructive dismissal, and how the courts in Alberta evaluate such cases, is essential for protecting your rights and avoiding legal pitfalls.
Legal Definition of Constructive Dismissal
Constructive dismissal arises when an employer’s conduct demonstrates that it no longer intends to be bound by the employment agreement. The Supreme Court of Canada, in Farber v. Royal Trust Co. (1997), defined constructive dismissal as occurring in two general circumstances:
- When an employer unilaterally makes a significant change to a fundamental term of the employment contract;
- When the employer’s behavior creates a hostile or intolerable work environment, effectively forcing the employee to resign.
In both cases, the employee’s resignation is treated not as voluntary, but as a result of the employer’s breach of the employment agreement.
What Changes Can Lead to Constructive Dismissal?
Not every change in the workplace qualifies as constructive dismissal. Courts assess the nature, extent, and impact of the employer’s actions. A single substantial change or a pattern of smaller changes that collectively alter the employment relationship may be grounds for a claim.
Common examples include:
- Significant Reduction in Salary or Benefits: A cut in pay, commissions, or benefits without the employee’s consent may be viewed as a breach of contract.
- Demotion or Change in Job Duties: Assigning lesser responsibilities, changing job titles, or altering reporting relationships may constitute constructive dismissal if they significantly change the role.
- Unilateral Relocation: Forcing an employee to relocate to another city or substantially increasing their commute time without agreement may be considered unacceptable.
- Toxic Work Environment: Workplace harassment, bullying, or deliberate isolation may amount to constructive dismissal if the environment becomes untenable.
- Suspension Without Just Cause: If an employee is suspended without a legitimate reason and without pay, it may be deemed a repudiation of the employment relationship.
The question is always whether the change or conduct would lead a reasonable person in the employee’s position to conclude that the employer no longer intended to be bound by the employment contract.
Is Advance Notice or Consent Required?
In Alberta, and under Canadian common law, employers can only change fundamental terms of employment with either:
- The employee’s express consent; or
- Reasonable notice, equivalent to what would be required to lawfully terminate the employee and offer a new contract.
If neither occurs, and the employee is faced with a substantial unilateral change, they may have grounds for constructive dismissal. It is important to note that remaining silent or continuing to work under the new terms could potentially be interpreted by the court as implied acceptance of the new conditions.
Resignation and Timing Considerations
If you believe you’ve been constructively dismissed, acting promptly is crucial. Delaying your response or continuing to work for an extended period may jeopardize your claim. However, immediate resignation is not always advisable without seeking legal advice. Courts recognize that employees may need time to assess their situation, but unreasonable delay can undermine your position.
Employees facing potentially constructive dismissal situations should consult with an employment lawyer before resigning. At Shim Law, we can assess your case and help you determine the appropriate next steps.
Legal Remedies Available
If constructive dismissal is established, the employee may be entitled to damages in lieu of reasonable notice, just as if they had been formally dismissed. The amount of damages depends on various factors, including:
- The employee’s length of service;
- Age and position within the company;
- Availability of similar employment opportunities;
- The nature of the change or misconduct by the employer.
In some cases, if the constructive dismissal involved bad faith or harassment, additional damages may be awarded, such as moral damages or punitive damages.
Constructive Dismissal vs. Wrongful Dismissal
While the terms are sometimes used interchangeably, they are legally distinct. Wrongful dismissal occurs when an employer terminates an employee without providing adequate notice or compensation. Constructive dismissal, on the other hand, involves the employee resigning due to the employer’s actions that amount to a repudiation of the employment contract.
Despite the difference in how employment ends, both scenarios may entitle the employee to similar remedies under the law.
Employer Considerations: How to Avoid a Constructive Dismissal Claim
Employers can reduce the risk of constructive dismissal claims by:
- Providing written employment contracts that include flexibility clauses;
- Consulting with employees before implementing major changes;
- Giving reasonable notice of any changes to fundamental terms;
- Documenting performance issues, role modifications, or business reasons for operational shifts.
When in doubt, seeking legal advice before implementing any significant workplace change is prudent. Shim Law provides comprehensive guidance to employers to help them remain compliant and avoid liability.
When to Contact a Lawyer
Because of the nuanced and fact-specific nature of constructive dismissal, both employees and employers should seek experienced legal counsel when these issues arise. Shim Law’s employment lawyers in Calgary offer knowledgeable and confidential advice tailored to your circumstances.
We can assist with:
- Evaluating whether a change amounts to constructive dismissal;
- Drafting or reviewing employment contracts;
- Negotiating severance packages;
- Representing you in court or mediation if necessary.
Contact Shim Law Today
Constructive dismissal is a serious legal issue that affects both employees and employers. Whether you are an employee who feels forced to resign due to unfair treatment, or an employer considering structural changes to your workforce, it is essential to understand the legal implications and proceed with caution.
At Shim Law, our experienced Calgary-based employment lawyers can help you protect your rights, assess your legal position, and achieve a fair outcome. Contact us today to schedule a consultation and receive guidance tailored to your situation. Please contact Shim Law today at 403-476-2011 or book an online consultation to learn more.
