What is constructive dismissal
A constructive dismissal occurs where one party to the contract, typically the employer, unilaterally changes a fundamental term or terms of the contract. What is “fundamental” has been determined by the courts. For the employer to act unilaterally means that the employer made the change and put it into effect without the agreement of the employee. If you were terminated from your employment then you may have a wrongful dismissal case under constructive dismissal laws in BC, in which case fill out our dismissal questionnaire.
Where a constructive dismissal occurs, usually, it is the case that the change made by the employer is not to the benefit of the employee (Theoretically, a beneficial change without consent might be a constructive dismissal, but most employees don’t complain about these changes). Once the employer breaches a fundamental term as described above, they are in fundamental breach of the whole contract, and the law considers that the employer has repudiated (or rejected) the contract. When this happens the employee is entitled to accept the repudiation, bringing the contract to its end. The employee is then allowed to pursue the employer in damages for the breach. Damages for such breach are usually calculated in terms of the reasonable notice set out in the common law but may be based on a contractual notice provision where the wording of the contract supports this.
Common Examples of Fundamental Breaches
- Reduction of pay – salary, commissions, nondiscretionary bonus, benefits, etc.
- Change of Title
- Change of Duties
- Reduction of Reporting Staff
The Terms of Contract Law
Employment law is based the law of contract. This is so because each employment is a contractual relationship between employer and employee, involving a contract that is either verbal, written, or a combination of the two. Every contract contains features of the overall agreement, known as terms. Some terms are fundamental to the contract, and some are merely supportive but not necessarily fundamental. A fundamental term is a term that is so important and basic to the functioning of the contract that to change or eliminate it would destroy the contract. Pay is always a fundamental term. Another likely fundamental term in many employment contracts is duties, title or job function. Another likely fundamental term is hours or days of work.
Forming a contract always involves a trade. Where there is no trade, there is no contract. In the employment context, the employee trades his or her services and time for payment and other benefits from the employer. This trade of valuable things is called “consideration”.
In order to change a contractual term, the agreement of both employer and employee is required and there must be consideration for the change. New terms imposed without agreement and consideration may be unenforceable, and may also destroy the whole contract. In an employment scenario, when an employer imposes new terms and the employee does not agree to them, the employee may be constructively dismissed. In that case, the employee must take decisive action quickly. Continuing on in the employment may indicate the employee’s acceptance of the change.
Time is of the essence
Depending on the nature and duration of the employment, the window of opportunity may close quite quickly. With the constructive dismissal law in BC, the doctrine of condonation applies. An employee may “condone” a unilateral change if he or she continues to work for too long under the new terms. His or her agreement to the change would be implied.
As an example, an employer unilaterally reduces the employee’s pay by 25% without notice. At that point, it is probably safe to conclude the employee has been constructively dismissed. However, if the employee continues to work under the new conditions at the lower pay, the law will conclude that the employee condoned, or agreed with the change in pay and that the agreement was shown by the employee’s actions. At that point, the law will prevent the employee from making any claim for constructive dismissal.
In the event a constructive dismissal is established, a constructively dismissed employee is entitled to reasonable notice under the common law, just as an employee who was wrongfully dismissed would be to the extent of the unilateral change. If you feel that you may have been subject to a constructive dismissal, you should immediately seek legal advice from an employment lawyer.