In an ever-evolving business landscape, many organizations find it advantageous and even necessary to revisit employment terms from time to time. Considering changes to employment terms is often a necessary evil stemming from economic downturn, restructuring, changes to management or a shift in business strategy. However, actually making the changes requires caution and a sound strategic plan.
One of the key risks associated with altering employment terms is the threat of a constructive dismissal claim. Understanding this concept and knowing how to mitigate the associated risks is crucial for employers.
Constructive dismissal can occur when an employer unilaterally changes a fundamental term of an employee’s contract without the employee’s consent, in effect terminating the employee’s employment. If played out, the employee may leave their job and sue the employer for wrongful dismissal. Defending against such a case can be expensive, result in a finding of severance owing to the employee, cause damage to the company’s reputation and workforce morale, and loss of valuable talent.