If an employer unilaterally alters the fundamental terms of an employee’s working conditions, the employee is entitled to object to the change and consider their employment as having been terminated. This is called a constructive dismissal. Constructive dismissals often arise from significant changes to an employee’s pay structure, a geographical transfer, a demotion, and significant changes to job responsibilities. However, other circumstances can also result in a fundamental breach of the employment relationship. For instance, constructive dismissal claims can materialize from an intolerable workplace.
If an employer wants to maintain flexibility while mitigating the risk of a constructive dismissal claim, it can include contractual terms reserving its right to change fundamental terms of the relationship as necessary. For instance, employers often include clauses that provide that a transfer of the employee’s working location is possible and that such a transfer would not amount to a constructive dismissal.
Constructive Dismissal Claims Are Fact Specific
Constructive dismissal claims are very fact-specific and greatly depend on the contractual terms between the parties as well as the details regarding the unilateral changes in question. If an employee resigns, and a judge finds that they were not constructively dismissed, the employee will not be entitled to any termination or severance pay. Accordingly, employees should seek legal advice to determine if the employer’s conduct is, in fact, a repudiation of the employment agreement.
In some cases, an employer will impose a change that has an effect on the employee that may not be fully understood at first. An example of this occurs when a commissioned employee’s pay structure changes. This may result in a significant reduction in pay, but it is often difficult for the employee to make such a determination at first glance. Even more difficult is the employee’s decision to deem the change to be a constructive dismissal by formally objecting and resigning. If an employee does not officially object to the changes within a reasonable time from the moment they come into effect, they will have condoned and consented to the changes. Accordingly, employees are required to take an irrevocable legal position that may be detrimental to them if it is found that the change is not in fact that significant. To address this problem, courts have recognised an employee’s entitlement to a trial period where the effects of the changes are initially unclear.
Belton v. Liberty Insurance Co. of Canada
In Belton v. Liberty Insurance Co. of Canada, the Court of Appeal for Ontario accepted that employees should be provided an opportunity to adjust to new terms and conditions so they can assess the new terms before they are forced to make a tough decision. At paragraph 26, the Court reasoned as follows:
“Allowing employees reasonable time to assess the new terms before they are forced to take an irrevocable legal position not only addresses their vulnerability, but also promotes stability and harmonious relations in the workplace.”
The Court appreciated the vulnerability of employees who believe they may be constructively dismissed and the difficulty in making the life-altering decision of resigning from their employment. Accordingly, if an employee is unsure of how the change will affect them, they can have a trial period where they assess the changes, without being deemed as condoning or consenting to the changes.
Initial and Continued Protest is Advised
It is important to note that an employee who wishes to be afforded the opportunity to try out the new changes must clearly protest the changes when they are first communicated and continue to protest the changes during the trial period. Silence and a lack of protest may be interpreted as an acquiescence to the new terms, especially if the employee delays the trial period for more than a couple of months.
How long an employee can work under the new terms before they are deemed to have accepted the changes depends upon the facts of each case. Factors that should be considered include:
- How long has the employee been with the employer? Long term employees may be afforded a longer period to assess the change;
- Did the employee continue to protest the new working conditions?
How clearly did the employer set out the new terms of employment?
 2004 CarswellOnt 3324 (Ont. C.A.),