Constructive dismissal or reasonable role adjustments?

A recent decision from the British Columbia Civil Resolution Tribunal (CRT) highlights the importance of context in assessing if an employer’s actions amount to constructive dismissal.

The case, Zaharia v. Coast to Coast Traffic Solutions, provides guidance for employers grappling with the delicate balance between justified role adjustments and the risk of constructive dismissal claims.

“There's always unique factors in each case that can set them apart,” says Kristen Shaw, employment lawyer with McMillan in Vancouver. “You can have cases that on their face seem very, very similar, and one in which the court rules that there is constructive dismissal, and in the other, that there isn't.”

Demotion leads to constructive dismissal claim

The Zaharia case centred on an employee hired as both a Traffic Control Person (TCP) and Lane Control Technician (LCT) by Coast to Coast Traffic Solutions (C2C). Over the six months of his employment with C2C, a series of errors led C2C to reassign the employee solely to TCP duties; the court noted he was told by CRT’s CEO that he was “not fit” for LCT work because of “too many mistakes.”

The employee resigned the same day as the notification, alleging constructive dismissal, arguing that this reassignment constituted a demotion and breached his employment terms.

C2C defended its decision, arguing that the reassignment did not constitute a breach of his terms of employment since the employee was hired for both roles with no guarantee of a set number of shifts.

The court agreed, stating the employee, “was hired as a TCP and LCT, and had no guarantee of any minimum hours in either position. So, I find the change to continue as a TCP was a change permitted by the parties’ employment contract.”

The contextual nature of constructive dismissal

Shaw explains that while constructive dismissal is generally defined by a “unilateral act that breaches a fundamental term of employment,” the specific circumstances of each case are crucial.

“What constitutes a constructive dismissal is going to really depend on how that employee is compensated and how that is assessed,” she says.

In the Zaharia case, the employee’s dual-role arrangement was central to the CRT’s decision; Shaw points out that this was a rare circumstance where an employee was hired to perform two different roles, with different pay scales and no guaranteed hours in either role.

“This case is a prime example of how looking at what seems to be a hard-and-fast rule about constructive dismissal can still be informed by unique circumstances,” she says.

“In this case, there were no guaranteed hours in either role, so that wasn't a factor that was considered, but a reduction in hours certainly can be something that can be grounds for constructive dismissal.”

Common constructive dismissal pitfalls for employers

A frequent issue arises when employers alter compensation structures, such as bonuses or commissions, which can unintentionally reduce an employee’s overall wages, Shaw explains.

While some variability in compensation might be expected in roles like sales, where earnings can fluctuate based on performance, such changes need to be carefully managed to avoid claims of constructive dismissal.

Another common issue involves changes to an employee’s duties or reporting relationships.

“Shifts in team structures that result in people having their direct reports moved to someone else, or changes to their duties, depending on the circumstances, can amount to constructive dismissal,” Shaw says.

Beyond role and duty changes, employers should remain vigilant about other factors that could contribute to a constructive dismissal claim, such as unfair treatment, harassment, or threats of dismissal.

“If an employee feels...they have no choice but to resign because their employment is essentially fractured, that can sometimes...result in constructive dismissal,” she says.

Best practices for employers to avoid constructive dismissal

Given the complexities surrounding constructive dismissal, Shaw advises employers take several precautionary steps when contemplating changes to an employee’s role. First and foremost is the importance of clear communication and documentation.

“Making sure that [changes] are really clear and really well understood is so important,” she says.

Employer should also provide ample notice of any changes, ideally equivalent to the notice period an employee would be entitled to upon termination. However, Shaw says that the best approach is often to propose changes to the employee, explaining the rationale behind them, and seeking the employee’s voluntary agreement.

“The number one thing I recommend is proposing a change to an employee, explaining why a company wants to make that change, and see if they're willing to do it voluntarily. Because it's really about a unilateral change by an employer, that's a really key factor,” she says.

This consent must be truly voluntary, without undue pressure, says Shaw, and employees should be given sufficient time to consider the proposed changes.

Finally, employers should proactively assess the potential impact of any changes on employees, before they are proposed; consulting with legal counsel before making significant adjustments can help identify and mitigate risks before they lead to disputes, she says.

“Handling it before that’s been presented to an employee is the best way to manage that risk.”