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What you need to know about wrongful and constructive dismissals during COVID-19

As we navigate through the pandemic employees are in the driver's seat
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When the pandemic first hit in March of 2020, Peter McSherry’s employment law office in Guelph fell silent for a few weeks and then the phone calls started coming in from employees who had been laid off or let go.

In the early months of the pandemic with businesses temporarily shuttered, in-person retail restricted, and employees directed to work from home, everyone was operating under a giant cloud of uncertainty.

McSherry said, “There was a lot of uncertainty into how the legal principles would apply to that situation and I think the expectation was that people would be trying to make things work.” Still, many workers found themselves out of a job.

What is the difference between wrongful and constructive dismissal?

Wrongful dismissal is when the employer tells an employee their employment is terminated. Constructive dismissal is when the employer imposes unilateral changes to the employment contract that the employee doesn’t accept or are designed to push the employee out, so they have no choice but to quit. Matters that may be considered a constructive dismissal are a reduction in pay, a reduction in hours, a change in job requirements, or a temporary layoff.

Is  a temporary layoff legal?

If you’ve never been laid off before, the Employment Standards Act doesn’t create the right to lay an employee off. However, if an employee agrees to a layoff, it becomes legal. But McSherry warns, “Once you agree to a layoff, you will have imposed a term in your employment contract that in the future, they can lay you off.”

Under normal circumstances, an employee who was laid off would be entitled to severance. But some employers are taking advantage of the pandemic to get rid of employees they don’t want. The court would view that as a constructive dismissal and the employee would be granted severance.

Can an employer ask you to take a pay cut?

It’s always legal for an employer to ask an employee to take a pay cut, assuming it doesn’t run afoul of pay equity plans and it’s not done in a discriminatory manner. But a problem occurs when an employer imposes a pay cut. McSherry said, “Courts will allow a pay reduction of 10 to 15% before it’s deemed a constructive dismissal and a severance package is required.” If employees do agree to a pay cut or any other change in in their contract, they should specify in writing what they’ve agreed to and for how long they’ve agreed to it.

Throughout the pandemic Peter McSherry has been extremely busy dealing with wrongful and constructive dismissals. His best advice is, “Don’t sign off on anything until an experienced employment lawyer has looked it over. “It’s very difficult to get someone out of an agreement that they’ve already signed off on. You must prove it was signed under duress and that the process was not just a hard bargain, it was unfair.”

How do you know if you’ve been wrongfully dismissed?

McSherry said the only way to know if you’ve been wrongfully dismissed is to talk to a knowledgeable employment lawyer who will review the circumstances “Employees who have been let go should assume that they are entitled to more severance than what has been offered.” Employees may be owed significant entitlements.

Are wrongful dismissal cases easy to resolve?

Wrongful dismissal cases are highly negotiable. The courts look at many factors to determine severance. Employers often make a lowball offer and are willing to go up from there. Matters that are litigated are usually resolved through mediation and the resolution process is quick.

McSherry said the nice thing is, with the labour market tightening, we’re in an employees’ market right now and circumstances are tilting in favour of employees. He added, “If employees believe they’ve been victims of wrongful or constructive dismissal, they should contact an employment lawyer to discuss it and see what their options are.”

This is an unusual time and if ever there was a period where workers needed to understand their rights, it’s now.

If you feel you have been treated unfairly by your employer and would like to speak to an experienced employment lawyer, contact Peter McSherry at (519) 821-5465 or visit: