Toronto Employment and Labour Law Blog: Fired? Negotiating Severance: 10 Keys to Success

#7 CONSTRUCTIVE DISMISSAL

Henry believes that his promotion from V.P. Marketing to the position as Chief Executive Officer of the company is in the bag.  George, the current CEO of the company, is retiring and has made it known that his choice of successor is Henry.

Nothing has been promised in writing but Henry knows that he is a natural choice. George retires, but the CEO selected by the Board is not Henry. Henry, severely disappointed, heads directly to an employment lawyer complaining that he has been constructively dismissed. On that basis, he wished to leave and sue the company for constructive dismissal. Henry was disappointed to learn from his lawyer that he has not been constructively dismissed. If he left the company, that would constitute a resignation and, as a consequence, he would not be entitled to damages, notice or severance. He would leave his employment as VP Marketing with nothing.

The term constructive dismissal is a legal term based on legal criteria. It is often misunderstood by non-lawyers and even lawyers in general practice not familiar with practice in this area of employment law.  A constructive dismissal which amounts to a wrongful dismissal is based on a finding of a fundamental, negative breach of a person's employment contract or relationship initiated by the employer and acted upon by the employee without delay. That negative breach must be fundamental and not marginal. For example, a change in the bonus structure that reduces the employee's bonus entitlement may be insufficient. An employer has the right to make reasonable adjustments to an employee's compensation and responsibilities. If however, there is a fundamental negative change in the employee's status, authority, responsibility, and compensation that may trigger a constructive dismissal amounting to a wrongful dismissal. For example, if the VP Marketing reporting to the CEO is demoted to a salesperson and suffers a significant salary reduction there may be grounds to allege a constructive dismissal.

It is important to note that even though you have suffered a constructive dismissal you cannot leave your job. You cannot take the position; " I have suffered a constructive dismissal. I am out of here." Unless by remaining on to mitigate,  places you in a "toxic" environment, you may have no choice but to remain in your present position in order to mitigate your damages even though it is clearly uncomfortable to do so. Further, the onus of proof is squarely on the person alleging constructive dismissal, to prove it, unlike a termination for cause where the onus is clearly on the employer to prove "cause" Constructive dismissal is a technical legal concept. A non-lawyer ought not to decide whether constructive dismissal has occurred. That judgment can only be made by an experienced employment lawyer after a careful review of the facts and the law.

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