Employment & Labour Law

What Constitutes Constructive Dismissal in Alberta?

December 5, 2023

Music room filled with guitars and keyboards representing the termination of a music teacher

The term “constructive dismissal” finds its way into many conversations, however, it can sometimes be misunderstood. The term itself carries significant weight and can have far-reaching implications in employment-related disputes between employees and employers. Alberta’s employment landscape, like that of any other jurisdiction, is governed by a set of laws and regulations designed to protect the rights of both employers and employees. Thus, constructive dismissal is a concept that emerges from this legal framework, representing a complex web of circumstances that can fundamentally alter the employment relationship.

So, what exactly is constructive dismissal, and what does it mean to employees and employers? This blog will shed light on the intricacies of constructive dismissal, exploring its definition, key components, and the potential consequences for both parties involved in light of a recent decision from the Alberta Labour Relations Board.

What is Constructive Dismissal?

Constructive dismissal can also be used to describe situations where an employer has not directly terminated the employee’s employment, but has engaged in unilateral conduct, behaviour, or made decisions that result in a fundamental change to the terms of an employee’s employment. For example, significant changes to work conditions, hours, salary, or responsibilities might amount to constructive dismissal. Circumstances involving a toxic work environment created by, or tolerated by, the employer, perhaps due to harassment or discrimination, may also give rise to allegations of constructive dismissal.

Constructive dismissal may sometimes be referred to as “disguised dismissal” or “quitting with cause” because it typically occurs in situations where the employer offers the employee the alternative of leaving their employment or submitting to and complying with the employer’s unilateral and substantial alteration of a key term of their employment.

The common theme among these actions and behaviours is that once the employer has done or condoned a particular and fundamental element of the employee’s employment agreement, and the employee can no longer continue to fulfill their duties as initially agreed upon, they may feel they have no other choice but to resign from their employment. In some cases, instead of formally terminating the employment contract, employers may abuse their authority in an attempt to force the worker into quitting, in order to try to avoid their legal responsibility for a termination payment. In these cases, an employee may have a valid claim for constructive dismissal, and the employer may find themselves paying more than they would have if they had followed appropriate termination procedures.

How to Prove That Constructive Dismissal Has Occurred

Whether or not an employee has been constructively dismissed is not based on how the employee perceives the situation, but rather, it is based on an objective view of the employer’s conduct. Claims for constructive dismissal are very fact-specific, therefore, a thorough analysis of the circumstances involved in each case must be undertaken. Employees then bear the onus of establishing that the employer’s change to their employment constituted a constructive dismissal.

In many cases, the starting point for any analysis is the applicable employment contract, as this sets out the initially agreed upon terms of the employment relationship, including the employee’s responsibilities, compensation structure, and working conditions. From there, the employee must highlight which contractual term was fundamentally altered, and how it was altered. What must ultimately be established is that the employer reneged on the employment agreement and altered the terms to such an extent that they failed to uphold their obligations under the original contract.

Distinguishing Between Constructive Dismissal and Simple Termination

The question of whether or not an employee had been constructively dismissed was the subject of a recent decision from the Alberta Employment Standards Appeals Tribunal in the matter of Sarah McLachlan School of Music Society v Miciak. In this case, the appellant was a charitable organization that employed a Contract Teacher Artist on a year-to-year basis who was compensated at an hourly rate without benefits. The employment contract stipulated that the respondent would work 16 hours per week at a rate of $34.70 per hour. The employment contract also provided that she would undertake an additional 4 hours of administrative work each week at an hourly rate of $25.00.

When the COVID-19 pandemic began in March 2020, it affected the charity’s enrollment as the appellant typically had approximately 94 students per week. However, by March 2020, the enrollment had dropped to approximately 22 to 23 students per week. Discussions between the Interim Executive Director and the Operations Manager for Edmonton contemplated establishing a greater administrative/executive presence in Edmonton.

New Edmonton-Based Position Created

Following these discussions, the appellant created a Student Services Coordinator position as part of its planned reorganization for the Edmonton location and extended an offer of employment to LM (the “respondent”) dated September 3, 2020.

However, shortly before the commencement of the 2020 school year, the appellant was advised that the School Board would not be leasing its premises to it and the appellant was required to secure an alternative space. The appellant eventually found a new space at a community hall that had one large room, although the change in location was disruptive to the appellant in carrying out its school operations.

Proposed Contract Changes Not Accepted by Respondent

The terms of the new position included compensation by way of an annual salary of $38,861. However, the respondent took issue with some of the terms of the proposed employment, including the new position’s focus on administrative duties without any teaching responsibilities, as well as the amount of pay, which was actually $33,792. It was later determined that the amount initially offered erroneously included the costs of a benefit plan, which had not been budgeted as part of the annual salary paid to the employee. The appellant sent a subsequent offer of employment to the respondent which included the new, lower salary amount.

The respondent was hesitant to accept the new offer, and the parties continued discussions which turned “hostile”. The respondent indicated that she felt pressured to take the job and said that she did not want to continue in the position. The appellant indicated that while they felt bad about the situation, they were required to continue with operations moving forward. As such, the respondent discussed the situation with her coworkers and alleged mistreatment by the appellant, resulting in a conflict with management.

In October 2020, management and the respondent continued to discuss amendments to the proposed position, however, the parties were unable to come to a final agreement. As such, a Record of Employment was issued for the respondent stating “Shortage of work/End of contract or season” as the reason for the record. It also stated “Not returning” under the heading of “Expected Date of Recall”. In March 2021, the respondent filed her complaint.

Employer Appeals Order of Director

The appellant appealed the Order of Officer to the Alberta Labour Relations Board (the “Board”) which directed it to pay the respondent $1,028.66 as termination pay, and argued that the respondent’s proposed changes to the contract were insufficient to conclude that she was constructively dismissed. In support of its appeal, the appellant highlighted the fact that, as a Teaching Artist, 20% of the respondent’s work included administrative work and the proposed change merely increased this percentage. Further, the appellant argued that the change in compensation from an hourly rate to annual salary was a minimal change in the overall compensation scheme.

The respondent, on the other hand, asserted that these changes resulted in her being restricted to purely administrative work which was a demotion and thus constituted constructive dismissal.

Upon review of the circumstances, the Board concluded that the respondent’s employment was ultimately terminated without cause due to a shortage of work as the appellant was required to adjust its workforce. Therefore, it was not necessary to decide whether the proposed changes amounted to a constructive dismissal. Due to the appellant terminating the respondent’s employment, the ordinary provisions of the provincial Employment Standards Code applied and the employee was entitled to pay in place of notice of termination.

Contact the Labour and Employment Lawyers at DBB Law for Practical Advice on Terminations and Constructive Dismissal

Whether you are an employee who believes you have been constructively dismissed, or are an employer seeking to navigate the nuances of termination, the trusted team of labour and employment lawyers at DBB Law in Calgary can help you navigate complex legal terrain. Our lawyers provide each client with tailored legal advice and trustworthy representation to both unionized and non-unionized businesses and workers on various employment and labour issues. To schedule a confidential consultation with one of our lawyers, please contact us online or by phone at 403-265-7777.

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