Employment law in the AI era: the constructive dismissal problem

The July 2, 1978 issue of the New York Times was the final one the paper sent to print under the linotype process. After decades of relying on Gutenburg printing press-style technology, the newspaper invested in a computerized method that would eliminate the need to physically cast each letter of every page into lead plates for the presses.

The automation and digitization of the “hot type” process did not leave linotype operators jobless, however. Those same employees who had run the hot metal typesetting machines were sitting in front of computers the next day, typing stories into a digital format rather than hammering them into place. Asked, for a David Loeb Weiss documentary, what the technological upgrade would mean for him personally, one employee responded, “it means I’ll have to learn a new process.” Automation helped these workers print newspapers more efficiently but it did not replace them.

Automation driven by artificial intelligence is likely to result in similar experiences for millions of workers. While AI may render some jobs currently performed by people redundant, it will also create new positions that do not presently exist and expand the significance of many that already do. AI will lead to layoffs, but it will also require employers to retrain employees into new or different jobs.

A McKinsey Global Institute report (“Retraining and Reskilling Workers in the Age of Automation”) suggests fewer than five percent of occupations can be fully automated given currently demonstrated technologies. However, 60 per cent of jobs could have at least one third of their constituent activities automated. This implies a substantial workplace transformation, requiring as many as 375 million people to switch occupational categories by 2030. Indeed, of those executives surveyed by McKinsey, 62 per cent believe they will need to retrain or replace more than a quarter of their workforce between now and 2023 because of advancing automation. Eighty-two percent of executives at companies with more than $100 million in annual revenues believe retraining and reskilling must be at least half of the answer to addressing this skills gap.

Transitioning existing employees into new roles can have legal consequences. If handled improperly, one such outcome could be a claim for constructive dismissal by an employee as a result of this transition. Lawyers advising employer clients that expect to retrain and redistribute employees because of automation should equip themselves to proactively address issues surrounding constructive dismissal.

What constitutes constructive dismissal?

Constructive dismissal occurs where an employer demonstrates an intention to no longer be bound by the employment contract. It is the result of either a unilateral breach by the employer of an express or implied fundamental term of the employment contract, or cumulative employer conduct that generally shows an intention not to be bound by the employment agreement.

The breach may be immediate or it may be anticipatory, such as an announcement by the employer that it intends to make a fundamental change to the terms of employment at a future date, which could include a modification, for example, of job duties as employers integrate new technologies into their workplaces.

If an employee can show that a unilateral change imposed by the employer amounts to constructive dismissal, damages are assessed against the employer as if the employee was wrongfully dismissed. Counsel should take active steps to advise their employer clients on how to mitigate this risk as much as possible.

How can counsel help mitigate risk?

A constructive dismissal analysis is highly fact-driven. Counsel should review the relevant employment agreement, including written offers, written promotion letters, and verbal representations, and should consider the reality of the situation beyond the contract. Because a claim for constructive dismissal requires the employee to demonstrate that the change was imposed unilaterally by the employer, it is important to determine whether the employee granted the employer the right in the employment agreement to make certain changes, like redefining job duties. If the employment contract permits the employer to change an employee’s job duties, counsel should ensure other fundamental terms, such as compensation, hours of work, location, and seniority, are changed as little as possible when modifying employee roles.

If the change is likely to be a substantial unilateral breach of a fundamental term of the employment agreement, counsel should consider a number of strategies to reduce the employer’s potential liability. Because damages for constructive dismissal are the same as those for wrongful dismissal, liability flows primarily from an employee’s right to receive advance notice of termination of employment under statutory and common law regimes. Thus, advance notice of the change commensurate to the employee’s entitlement to reasonable notice for dismissal should be provided if possible, and it should be made clear that the employee will be terminated at the end of that period if they do not accept the new terms.

Where possible, written employee consent to the change should be sought. Meaningful consent secured in the absence of duress or coercion will make it difficult for the employee to claim the change was made unilaterally by the employer and hinder their ability to meet the criteria for establishing a constructive dismissal claim.

Particularly where multiple employees will be affected, counsel should be alert to human rights issues and should consider whether the change will have a discriminatory outcome.

Significant transitions of employees into new roles is just one of the ways automation driven by artificial intelligence will affect the workplace. Mass terminations, hiring practices, employee privacy, wages and benefits, occupational safety, and other issues will require careful and novel consideration by employers’ and employees’ counsel alike. We will all have to learn a new process.

This article was originally published by OBA JUST.

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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

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