Can a Layoff Become Constructive Dismissal?

In today’s job market, layoffs have become an unfortunate reality for many employees. While layoffs are often seen as a temporary measure, they can sometimes cross the line into constructive dismissal. When faced with a layoff, employees may find themselves in a risky position, unsure of what steps they can take. This blog will explore how a layoff can constitute as a constructive dismissal, key factors to look out for, understanding employee rights, and potential courses of action.

The difference between a layoff and constructive dismissal

A layoff is a temporary reduction or cessation of an employee’s work by an employer, typically with the intention to recall the employee back to work. This may happen for reasons beyond an employee’s control such as financial constraints, lack of work, results of company restructuring, or external factors like relocation. In Ontario, the Employment Standards Act, 2000 (“ESA”) governs an employer’s ability to implement layoffs. Typically, the employee is not entitled to pay during this period. However, laid off employees may receive a severance package to help support them as they look for a new job.

Constructive dismissal occurs when an employer unilaterally makes a substantial change to the fundamental terms and conditions of an employee’s contract without their consent. This can include changes to compensation, job responsibilities, work location, or other significant aspects of employment. In this case, the employer will not directly terminate the employee but rather create these significant changes, fail to comply with the contract of employment, or express the intention to do either thus forcing the employee to resign.

When does a layoff become constructive dismissal?

Employees may consider having been constructively dismissed from their employment when employees undertake a layoff that is beyond the confines of the Employment Standards Act and violates the law. In such instances, the employee may be entitled to compensation for their wrongful termination.

Key factors in determining if a layoff may be considered constructive dismissal

Here are some key factors to determine if a layoff might be considered constructive dismissal:

1. Indefinite Layoff Without Cause: If an employee is laid off for an indefinite period without a legitimate business reason or a clear recall date, this could be seen as a breach of the employment contract.
2. Drastic Changes to Employment Terms: The layoff can be considered constructive dismissal if it involves significant changes to the employee’s job, such as reduction in hours causing their full-time role to turn into part-time, reduced pay, and changes in responsibilities resulting in a demotion.
3. Violation of Employment Contract: If the contract does not allow for layoffs or specifies terms under which a layoff may occur, and the employer violates these terms, a layoff may be seen as constructive dismissal, potentially leading to a constructive dismissal claim.
4. Lack of Reasonable Notice: A constructive dismissal claim may occur if an employer fails to provide reasonable notice of the layoff, as required by their employment contract or provincial employment standards.
5. Permanent Layoff without Severance: Under the ESA, a single layoff lasting longer than 13 weeks in any period of 20 consecutive weeks is deemed a termination of employment. The same applies to a series of layoffs longer than 35 weeks in any 52-week period. Once the layoff is effectively permanent and the employer does not offer appropriate severance pay, the employee might claim constructive dismissal.

Options for employees

If you believe you have been constructively dismissed due to a layoff, there are some options to consider:

• Negotiate: With the guidance of an employment lawyer, employees may attempt to negotiate with their employer to resolve the issue and clarify the terms when returning to work.
• Resign and claim constructive dismissal: If the employee believes the layoff or changes are unreasonable and constitute a breach of contract, they can consider resignation and claim constructive dismissal. This option should be carefully considered as it carries risks, including potential loss of income and the burden of proving constructive dismissal in court. Legal advice is strongly recommended before taking this step.
• Accept the change: If the changes are not detrimental, employees may choose to accept it and return to work under the new conditions.
• File a complaint with Employment Standards: Depending on your province or territory, you can file a complaint with the local employment standards office, which can investigate whether your layoff violates employment laws.

What steps can an employee take?

1. Document everything: Keep detailed records of all communications and changes to your employment, including layoff notices and recall information.
2. Review your employment contract: Check if your contract allows for layoffs or changes to employment terms.
3. Communicate clearly: If you decide to submit a constructive dismissal claim, clearly communicate your position to your employer in writing.
4. Consider timing: Act within a reasonable timeframe to submit a constructive dismissal claim. Waiting too long may be seen as accepting the changes.
5. Explore alternatives: Before resigning, consider if there are other positions within the company that might be suitable and discuss these options with your employer.

When should you consider legal advice?

It is highly advisable to consult with an employment lawyer before taking any action. They can help you understand your rights, evaluate the strength of your constructive dismissal claim, and guide you through the legal process if you choose to pursue it.

Takeaway

Navigating layoffs and constructive dismissal requires careful consideration of legal rights, employment contracts, and individual circumstances. In some instances, it may be difficult to evaluate if a layoff constitutes as a constructive dismissal as it often depends on the specific details of each case. It is crucial to understand your rights and options when faced a layoff by seeking legal advice to ensure you are taking the best course of action.

If you have been laid off and believe it has become a constructive dismissal, we strongly encourage you to contact Sultan Lawyers online or by telephone at 416-214-5111.