One of the most common inquiries I receive in regards to my employment law practice is questions concerning the issue of constructive dismissal. It is a principle often misunderstood by both employers and employees alike.
In practical terms, constructive dismissal describes a situation where the employer has not directly fired the employee, but rather, has failed to comply with the contract of employment to such an extent, that the terms of employment are fundamentally different than the original terms of employment agreed to between the parties. The employee has essentially been dismissed from employment, even though there has been no overt act of dismissal on the part of the employer. Constructive dismissal will most often occur when the employer makes fundamental changes to the employee’s job duties, hours of work, or remuneration, without providing adequate notice.
This is not to say that an employer is restricted from making fundamental changes to an employee’s duties, hours or remuneration. Rather, an employer cannot do so without providing sufficient notice to the employee – the same notice period required in the event that the employee was to be terminated without just cause.
Consider the case of Borsato v. Atwater Insurance Agency. The Plaintiff Ms. Borsato was the office manager of the Defendant Insurance agency. She had commenced her employment with Atwater in 1996 and during the course of her employment, and with the consent of her employer, Ms. Borsato had reduced her work hours to 4 days/week.
In 2006, Atwater was sold and Ms. Borato continued to work for the Company, after it was purchased. Initially, it was the new owner’s understanding that Borsato was working full time. On learning this was not the case, the employer wrote Borsato a letter advising her that her pay would be cut by 20% immediately and that she would be charged a monthly holdback of $500 of her commissions to recover the amounts that she was allegedly overpaid.
The court found that the employer’s unilateral decision to reduce Ms. Borsato’s pay was a fundamental change to the existing employment relationship and thereby constituted constructive dismissal. The court rightly pointed out that amendments to the employment agreement require contractual intention and consideration. In other words, Atwater could not change the terms of Ms. Borsato’s employment without her consent, proper notice, or compensation.
So what could have Atwater done to avoid this situation? First, Atwater could have given Borsato reasonable notice she was either required to work full time hours, or in the alternative, that her remuneration would be reduced by 20%. In fact, Atwater could have made almost any changes to the terms of employment, had it given Ms. Borsato reasonable notice of any fundamental change to her employment. Alternatively, Atwater could have attempted to renegotiate the terms of employment with Ms. Borsato.
Atwater’s failure to provide Ms. Borsato notice had a price. After considering a number of factors, including the fact that Ms. Borsato had worked with the Atwater for an uninterrupted period of 16 years and that she took reasonable efforts to seek reasonable alternative employment, the court awarded Ms. Borsato damages equivalent to 16 months of severance in lieu of notice.
The information provided above is for educational purposes only. This information is not intended to replace the advice of a lawyer or address specific situations. Your personal situation should be discussed with a lawyer. If you have any questions or concerns, contact a legal professional.