Casual Legal: Constructive dismissal

DISCLAIMER: This article is meant to provide information to Alberta Municipalities members only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated. This content is not intended for the general public.

By Lauren Chalaturnyk
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

Every employer will, at some point, consider making changes to the terms of an employee’s employment agreement.

If the change is positive and results in more benefits or compensation to the employee, then an employer does not have to worry about having to deal with an unhappy employee. If, however, the change could be perceived by the employee as a "net negative," then the employer should be mindful of the potential for the employee to make a constructive dismissal claim and take steps to mitigate against such a risk. That is because if an employee successfully proves that they have been constructively dismissed, then it is as if they have been terminated without cause and they are owed pay in lieu of reasonable notice.

Constructive dismissal arises when an employer makes a unilateral and fundamental change to an employee’s employment terms, be it through changes to an existing contract or through conduct in the workplace. The changes must go to the core of the employee’s employment agreement and they must be substantial to constitute a “fundamental” change.

Changes that can create the risk of a constructive dismissal claim include:

• Changes to an employee’s compensation structure
• Removal of certain benefits
• Significant shifts in job duties.

While these types of fundamental changes can create risk, the best way for an employer to mitigate against that risk is to always provide sufficient notice of a change in employment terms. The length of notice will be dictated largely by the same factors that are looked at in the context of determining the reasonable notice period for a termination without cause, which include, but are not limited to length of service and age.

If an employer is implementing a change to one employee’s employment terms, then this is typically an easy analysis. The employer will look at the factors applicable to that employee and arrive at a suitable notice period for the change, bearing in mind that the general rule of thumb is three-to-four weeks for every completed year of service. This notice period and the specifics of the change should then be communicated to the employee, clearly and unequivocally, in writing.

If an employer is implementing changes to a group of employees’ employment terms, then the best practice is to look at the longest serving employee in the group, calculate the notice period applicable to that employee, and apply that notice period to the entire group of employees.

In some cases, the appropriate notice period will be operationally and practically impossible to implement, particularly when an employer is dealing with a long-term employee who may be entitled to a year or more of reasonable notice. In such instances, employers should consider providing as much notice as practicable, noting that the shorter the notice period, the greater the risk of a constructive dismissal claim. 

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or casuallegal [at] abmunis.ca (email) to reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or riskcontrol [at] abmunis.ca (email) to connect with Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.