Disputing constructive dismissal

Be careful when dipping a toe into these murky legal waters

In all wrongful terminations, the onus of proving the fact that there has been a dismissal rests on the employee – which makes constructive dismissal a risky form of dismissal claim.

The main risk is due to the fact that some necessary guesswork occurs in estimating whether a dismissal has occurred constructively or not. And the question of whether an employee can prove a dismissal often involves necessary guesswork in constructive dismissals. So, it’s no surprise that it is often a matter of dispute whether a dismissal has in law actually occurred.

Constructive dismissal occurs when an employee feels that conditions at work, or an employer’s treatment, is so bad, they have to resign. In an outright dismissal, everyone is clear the employment has come to its end because the employer has said and done clear things that leave no fuzziness as to whether the employment has ended. That might include such processes as having a termination meeting, handing a termination letter, issuing a record of employment, escorting the employee from the premises, ceasing pay and denying further work. There is typically no problem proving a dismissal in an outright dismissal.

The source of guesswork in constructive dismissals, however, typically relate to allegations about a change or series of changes to the terms of the employment agreement.

These changes are subject to chronological sensitivities – in other words, they must occur within a certain time-frame. They are also subject to an analysis of whether there was agreement, or discussion, or advance notification about the changes. They are further subject to an analysis of magnitude of change and the importance of change to the overall function of the original agreement. Because of the inherent complexity of constructive dismissals, there is often fertile ground for dispute on the facts. Thus, many constructive dismissals are disputed by employers.

The main battleground of dispute in constructive dismissals focuses on whether the changes claimed lead to a dismissal. The change or changes must be substantial, and must make the performance of the agreement that existed before the changes a thing of impossibility. The employer must be shown to have turned its back on the contract.

A Case for Constructive Dismissal

In a recent case in British Columbia Supreme Court, we see how this battle of the changes plays out.

The plaintiff employee was a sales representative who occupied a large sales territory and had a sales quota or budget set for her territory. The quota was used to determine the size of bonus compensation the employee would receive for her efforts. Her employment history showed that she always met or exceeded her sales quota, until certain changes were made.

The employer hired a second sales representative and then, over the objection of the plaintiff employee, split the sales territory of the plaintiff employee with the second sales representative, and then attributed sales quotas to each territory.

The plaintiff employee felt her sales quota was unreasonably high, and did not meet the quota for the first two quarters of the year in which the change took place. The second sales representative exceeded quota for the same periods. The plaintiff employee repeatedly called the employer to rectify the situation. The employer did promise to review the results at the end of each quarter and address results then. The plaintiff employee claimed that 30% of her income depended on meeting quota, and with the changes, her income was necessarily reduced against her will.

At the start of the third quarter, the plaintiff employee claimed a constructive dismissal based on the reduction of territory and increase in quota, claiming the quota was unreasonable and unattainable.

The employer argued that they made changes in consultation with the plaintiff employee, made those changes in a considered, measured and reasonable basis, and promised to address skewed results. The employer argued that the plaintiff employee could have made her quota by the end of the year and received her pay.

The court agreed that changes to pay can be fundamental changes that lead to constructive dismissals. But the court sided with the employer and dismissed the plaintiff employee’s case.

The employer was able to show that in setting quota, it used objective standards consistent with prior years. In addition, the employer was alive to the issues and promised to address skewed results at the end of each quarter. The court concluded that the employer was honouring the employment contract, not attempting to avoid it.

In other words, on balance, the plaintiff failed to prove that the changes resulted in a dismissal.

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