Dismissing an Employee: Fair Reason or Constructive Dismissal?

Both an employer and employee are entitled to terminate the contract of employment at any time, provided they do so within the confines of any labor laws governing their relationship. Termination of employment can be voluntary or involuntary.

A voluntary termination comes in the form of resignation, while an involuntary termination could be due to layoffs or because the employer fires the employee. 

To avoid disputes with former employees, regardless of how their termination occurred, good labor relations practice and recordkeeping are vital. You don’t want to be on the wrong end of a lawsuit with a huge settlement.

Involuntary dismissal

As an employer, you are entitled to fire an employee if you feel they are not performing satisfactorily or if their attitude or behavior is not in line with the company’s policies and expectations. Criminal or unethical behavior are also just causes for dismissal. 

To cover yourself as an employer, there should be a demonstrable reason for firing someone. Employment contracts are useful in this regard as you can prove that the employee violated the terms and conditions before terminating their services.

However, you must be able to prove that the dismissal not based on discrimination, retaliation, or victimization, as these are deemed unlawful conduct, and the employee could sue you over the termination. Should they prove their case, you will have to compensate them.

The ‘other’ involuntary termination

Constructive dismissal occurs when an employee resigns because they feel they have no other alternative but to do so. While resignation is deemed as a voluntary termination, constructive dismissal is not treated as one. Resourceful Compliance provides employers with materials and posters that detail state labor laws, including those that address constructive dismissal.

The circumstances under which a constructive dismissal takes place are when the employment relationship is so strained that the employee is unable to continue it. 

This could be due to a hostile work environment, harassment, or unfair working conditions, including low wages, increased hours, or a commute that isn’t reasonable after an involuntary transfer. Other conditions that meet the criteria for constructive dismissal include demotion and a unilateral change in a job description. 

There is even legal precedent where employees who were presented with the opportunity to quit before they were fired have successfully proven constructive dismissal. 

What happens after a constructive dismissal?

A former employee is free to approach an attorney with any evidence they might have that supports a claim of constructive dismissal. The onus is on the employee to prove on a balance of probability that the employer created the conditions that made the employee feel they had no choice but to resign. 

The legal concept of the reasonable person applies, and the court would weigh up whether a reasonable person would have felt the same way the employee did based on the evidence presented to it.

How to prevent constructive dismissal claims

The employer assumes liability for any compensation that arises from a constructive dismissal case. Whether the employer caused the constructive dismissal wittingly or without knowing is not a factor in the legalities surrounding the matter.

Very few people resign under these circumstances without first having lodged a complaint or grievance. Employers, especially in large companies, should take such complaints seriously as they may indicate a systemic problem. 

Keeping tabs on managers and supervisors to ensure they do not engage in behavior that justifies a constructive dismissal is a key to preventing it from happening. These employees should be kept abreast of labor law requirements and how their behavior as employer representatives can have serious repercussions for the employer.

Adam Richards

About Adam Richards

Adam Richards is a semi-retired business professional originally from Bangor, Maine. He spent the majority of his career in sales and marketing where he rose to the marketing lead of a Fortune 1000 company. He then moved on to helping people as a career counselor that specifically helped bring families to self-sufficiency through finding them rewarding careers. He has now returned to Bangor for his retirement and spends his free time writing. This blog will be about everything he learned throughout his career. He'll write on career, workplace, education and technology issues as well as on trends, changes, and advice for the Maine job market and its employers.