Now, more than ever, businesses are modifying and evolving in order to keep up with changes in social and industry trends, work environments, office locations, and the economy. Generally, your business evolving is a good thing and means you’re doing well but major changes to the organization of your business can also lead to constructive dismissals. As an employer, you need to be aware of how to make changes at work, without forcing employees out.
What is Constructive Dismissal?
It’s no secret that hiring and firing are pretty common and well-known practices while running a business. What is less talked about are constructive dismissals. A constructive dismissal happens when a unilateral change made to an employee’s contract or overall employment relationship is so significant that it basically breaks the contract. A change leading to a constructive dismissal claim must be fundamental and done without the employee’s agreement, leaving the employee feeling like their only option is to resign and sue for breaking that contract.
So What’s the Big Deal with an Employee Resigning?
When an employee resigns due to a constructive dismissal, they are not just quitting. A successfully proven constructive dismissal gives an employee the right to quit their job but still demand termination pay. When an employee quits on their own accord, they do not have these same entitlements to termination pay.
Examples of Constructive Dismissals
Not every management decision or change amounts to constructive dismissal or requires the employee’s endorsement. The change must be fairly significant and undermine the relationship between the parties. As well, most day-to-day legitimate discipline will not amount to constructive dismissal. Practically, this claim is fairly hard to succeed on.
Nevertheless, an employee can claim they have been constructively dismissed if they experience serious versions of the following examples:
- a demotion or change in salary (usually down – not many employees complain about a raise);
- significant changes to benefits or compensation amounts;
- a relocation to another city;
- significant changes to hours or work duties;
- an unfair treatment and/or working conditions;
- a toxic work environment;
- harassment or discrimination.
How to Avoid a Constructive Dismissal Claim
Many employers make the mistake of thinking that, because they are the ones calling the shots, they can make any decision about their employee’s contract unilaterally. It’s important to keep in mind that even if there is no written contract, the courts will still find an implied contract. (check out our past blog about the importance of employment contracts). Being in a legal relationship with your employees, means you need to hold up your end of the bargain.
A dismissal would only be characterized as being a “constructive dismissal” if the employer did not have the right to make the change to an employee’s contract. Some things to keep in mind to avoid constructive dismissals are:
- Get everything in writing. It’s best to have everything in writing in an employment contract right from the start. If there are any changes you want to implement down the line, outline the changes in writing and have your employee sign off to avoid any disputes or backtracking.
- Give notice of any changes you plan to implement. This gives an employee time to ask any questions about the changes and/or refute them. It also allows you to get your employee’s perspective and to possibly negotiate a mutually agreeable change.
- Offer additional compensation, if possible. Typically, to make changes to a contract, you need to offer fresh consideration. This means that if you want to make a significant negative change to the contract, the employee needs to get something of value in exchange. This could include additional days off, stock options, or other incentives, depending on the degree of the change. Employees will be more receptive to changes in their working relationship if they feel they are getting something better in return.
- Take employee complaints seriously, predominantly complaints about working conditions, toxicity in the workplace, harassment or discrimination. These types of claims are serious, so it’s important to address and rectify them immediately to avoid ongoing toxic work environments that force an employee to quit.
- Be transparent. Employees are much more receptive to changes when you are open and honest with them about why changes are being implemented.
Do you need advice on how to avoid constructive dismissals in your workplace? Get in touch for a consultation.