All employers face staffing challenges, and from time to time must make difficult decisions regarding their employees. When making these decisions, the employer is at risk of a claim against them for either wrongful or constructive dismissal. In this bulletin, we will review best practices for preventing these types of claims.
RMA strongly recommends that all matters involving employment be reviewed by your legal counsel prior to action.
Constructive dismissal arises when an employer makes significant, unilateral changes to essential terms of employment, effectively forcing the employee to resign.
Wrongful dismissal occurs when an employee is terminated without proper notice or severance, as required by employment standards or common law.
Both can lead to costly legal claims, reputational damage, and workplace disruption.
Best Practices to Prevent Constructive Dismissal Claims
- Avoid Unilateral Changes to Employment Terms
- Do not change key terms (i.e. pay, duties, hours, location) without employee consent or proper notice.
- Even changes to work-from-home arrangements or reporting structures can trigger claims.
- Use Well-Drafted Employment Contracts
- Include clauses allowing for reasonable changes to duties or temporary layoffs.
- Ensure contracts are signed before employment begins and provide consideration for any mid-employment changes.
- Ensure all agreements are in line with other policies and union agreements (if applicable).
- Provide Reasonable Notice for Changes
- If changes are necessary, give advance written notice equivalent to termination notice periods.
- Alternatively, offer something of value (i.e. a bonus or promotion) in exchange for agreement.
- If additional responsibilities are added, reasonable notice should be given to the employee.
- Respect Return-From-Leave Rights
- Employees returning from protected leaves must be reinstated to their original or comparable role.
- Failure to do so may be seen as a demotion or breach of contract.
- Maintain a Safe and Respectful Workplace
- Toxic environments, harassment, or discrimination can lead to constructive dismissal.
- Implement and enforce anti-harassment and workplace violence policies.
- Minimize Wage or Hour Reductions
- Significant reductions in pay or hours are high-risk triggers.
- If unavoidable, consult legal counsel and provide proper notice or consent. Business need would have to be proven.
- Document All Changes and Communications
- Keep detailed records of discussions, agreements, and notices related to employment changes.
Best Practices to Prevent Wrongful Dismissal Claims
- Follow Proper Termination Procedures
- Provide written notice or pay in lieu, as required by Alberta’s Employment Standards Code and common law.
- Consider length of service, age, role, and availability of similar employment when calculating severance.
- Legal Review
- Always consult with your legal counsel on employment matters PRIOR to termination. It is likely a requirement for your insurance policy.
- Terminating for cause requires serious misconduct and a high burden of proof.
- Always conduct a fair investigation and document findings.
- Apply Policies Consistently
- Inconsistent application of discipline or termination policies can lead to claims of discrimination or bad faith.
- Avoid appearance of bias or favoritism.
- Document All Changes and Communications
- Keep detailed records of discussions, agreements, and notices related to employment changes.
- Ensure documentation is in a safe, secure place that is accessible should the organization need it.
- Train Managers on Employment Law Basics
- Ensure supervisors understand the legal implications of their decisions and communications.
- Regular communication with employees needs to be documented.
Termination Clauses
Make sure that the termination clauses in your contracts are in line with current case law. Your contracts should be reviewed regularly with the assistance of your legal counsel.
If you have any questions, please contact your RMA Risk Advisor at risk@rmainsurance.com. If you have had an incident and need to report a claim, please contact the Claims department at claims@rmainsurance.com.