Constructive Dismissal Explained: What is Constructive Dismissal in Ontario?

by | Feb 3, 2022 | Employment Law | 0 comments

What if you came to work one day and your employer told you they were returning you to a junior position you held several years ago, effective immediately? Or you look at the schedule for the next pay period and your shifts, and no one else’s, were drastically reduced without warning?

It can happen seemingly overnight or evolve gradually. The terms of your employment have changed and are not the same ones you agreed to, or you dread going to work because your co-workers constantly harass you, and your supervisor does nothing about it.

You may feel that you have no choice but to leave your employment, with or without a new job. Depending on the circumstances that compel you to quit, you may have been constructively dismissed. Keep reading to learn why that’s a crucial distinction, what it can mean for you financially and what you can do about it.

Disclaimer: The information in this guide and everywhere else on this website is for general information only and is not intended to provide legal advice of any kind. No lawyer-client relationship is created by accessing or otherwise using Ertl Lawyers’ website or by communicating with a lawyer or staff member. If you need legal advice, please contact our staff at Ertl Lawyers. We’re more than happy to speak with you.

What Does Constructive Dismissal Mean in Ontario?

The definition and the test for constructive dismissal in Ontario comes from the 2015 Supreme Court of Canada (SCC) case Potter v. New Brunswick Legal Aid Services Commission. A constructive dismissal happens when:

  • An employer unilaterally (without consulting the employee) changes the terms of the employment to the point that it ‘substantially alters an essential term of the employment contract,’ whether it is a written or implied term of the contract.
  • The employer’s behaviour shows that they no longer wish to be bound by the employment contract – whether it’s a single incident or several in a pattern.

Since the employer either broke the terms of the contract or demonstrated that they did not intend to honour the terms, the employee is entitled to end the employment and seek what they are owed, i.e., severance pay and possibly damages (more on this later.) The employer is considered to have terminated the employment even though the employee resigned in a constructive dismissal case.

Ontario’s Employment Standards Act (ESA) also defines constructive dismissal. The ESA sets the minimum standards of employment contracts for most non-federal and non-unionized workers in Ontario. However, the Government of Ontario’s guide to the ESA uses the same criteria as the SCC to explain the meaning of constructive dismissal.

Because this definition is from the Supreme Court of Canada, it is the standard for describing constructive dismissal in B.C., Alberta, Manitoba, Quebec, Nova Scotia, etc.

When it comes to laws however, a deeper dive is usually needed to understand what they mean in practical terms. As you’ll see in the next section, even if you feel that you were constructively dismissed, a court or tribunal may disagree. That’s why it’s essential to always consult with Toronto employment lawyers on all work-related issues before acting – especially before resigning from a job.

Proving Constructive Dismissal Can Be Challenging

How Can Your Prove Constructive Dismissal?

The employee has the burden of proving a constructive dismissal in a trial or hearing. Looking at the first test to decide if an employee was wrongfully terminated, the change made by the employer must have substantially altered an essential term of the contract. Minor changes such as being given new tasks, a temporary shift to a new position or if the change was a financial necessity for the employer will not typically meet the test.

For there to be a finding of constructive dismissal on that test, the court or tribunal must identify:

  • Which specific term of the contract was breached; and
  • If, on the balance of probabilities, a reasonable employee in a similar situation would find the breach unreasonable enough to consider it constructive dismissal.

The court or tribunal will also look at the nature and effect of the breach compared to the intentions of both parties when they entered the employment contract to decide if a termination of employment in Ontario was a constructive dismissal.

Examples of Constructive Dismissal

These are some of the situations that can qualify as constructive dismissal.


Whether the demotion results in a change of job title and compensation or not, a reduction in the employee’s duties and the loss of a leadership role, prestige, status or opportunity for advancement can be considered constructive dismissal.

Change in Hours or Shifts

A drastic change in an employee’s hours, such as moving an employee from full-time to part-time, adding a significant number of hours or workload or changing an employee from afternoon to night shift can qualify as constructive dismissal.

Reduction in Salary or Benefits

Constructive dismissal occurs if an employee’s overall compensation is considerably reduced. The salary reduction can be disguised in many ways, such as reducing the hourly wage and increasing commissions or vice versa or the loss of bonuses, benefits or perks like travel expenses, a company car, gym membership, etc. A court will look at the overall effect on the employee’s compensation.

Transferring the Employee to a Different Geographic Location

This may be considered constructive dismissal unless your employment contract allows for a transfer or it’s common practice in your industry or position. Check with an employment lawyer to discuss your specific circumstances.

Temporary Layoff

The Government of Ontario made changes to the rules around temporary layoffs due to COVID-19. Usually, a temporary layoff can last no more than 13 weeks in a 20-consecutive-week period, with exceptions. Otherwise, a layoff is considered constructive dismissal unless:

  • The layoff is allowed in the employment contract.
  • Layoffs are standard practice in the industry.
  • The employee consents to the layoff or has in the past.

Workplace Harassment Can Result in Constructive Dismissal

Toxic Work Environment

Many behaviours can poison the work environment and make being in the workplace intolerable. If a reasonable employee would not return to work, the employee has been constructively dismissed under the second test established by the SCC for determining constructive dismissal – that the employer demonstrates they no longer wish to be bound by the employment contract.

Examples include:

  • Unfair performance reviews, vague or unfounded criticism, false accusations.
  • Unjustified or unexplained suspension.
  • Threats of dismissal or suspension.
  • Harassment, bullying or verbal abuse, whether by the employer or by co-workers with the employer allowing it to continue.

Other Actions That May Constitute Constructive Dismissal

Speak to an employment lawyer if you experience any of the above situations or a loss of privacy, a change in reporting relationships, removal of support or accommodations or other actions you feel make your work intolerable or significantly different than what you agreed to.

Your Actions Also Play a Part

If you do experience a fundamental change to your employment, you can either:

  • Accept the change. You will be deemed to have accepted the change if you do nothing and continue to work under the new conditions for a reasonable amount of time.
  • Reject the change, leave your employment and seek compensation by claiming constructive dismissal. This should only be done after speaking with an employment lawyer.
  • Notify your employer that you reject the change but continue to work for them to reduce or “mitigate” your losses. It is also recommended that you speak with an employment lawyer to determine your best next steps.

Your employer may give you advanced notice before your original employment contract is terminated and offer you the new position. They may also offer you your old position or a similar one or ask you to stay until you find new work.

Parties to a contract are expected to mitigate their losses, which may mean continuing to work for your employer until you find a new job. That expectation does not apply in cases where there has been harassment or where returning to work would be unreasonable, intolerable or result in humiliation of the employee.

What is the Compensation for a Constructive Dismissal Claim?

If you have been or are being constructively dismissed, it’s critical to speak with an employment lawyer to have your termination classified as such as quickly as possible. The difference between resigning an employment and being terminated without cause (which is how constructive dismissal is classified) can mean substantial amounts of money in compensation and benefits.

If you resign, you are not entitled to any severance, and you will not qualify for Employment Insurance (EI) benefits. If your resignation resulted from a constructive dismissal, you may be entitled to both.

Constructive dismissal is considered a without cause termination. This means you are entitled to the compensation you would have received had you been terminated without reasonable notice. Your employment contract determines the amount of notice, but it can not be less than the minimum prescribed by the ESA.

If the notice period is not mentioned in your employment contract, or you do not have one, the amount of reasonable notice you are entitled to will depend on several factors, including:

  • Your age
  • Length of employment
  • Character of employment, i.e., your position before termination.
  • Availability of similar employment (how long it will reasonably take you to find a similar position).

The general rule is that the longer it will take you to find similar employment considering the factors above, the more notice you are entitled to. Check out our Ontario severance pay calculator for a ballpark figure of how long a notice period you might be entitled to if your employment is terminated.

If you were the victim of harassment, you may also be entitled to punitive or human rights damages.

Better, Faster Results

If you feel that your employer is changing your employment, or you start receiving unfounded negative performance reviews, do not wait. Start documenting everything and contact us for a free, no-obligation consultation. We successfully negotiate severance packages our clients deserve, often without long-drawn-out litigation, allowing you to get your compensation quickly and move on with your life.

David Ertl Lawyer
About David Ertl
David Ertl, LL.B, has practiced employment and disability law for over 20 years. He is also a certified workplace investigator, former adjunct professor, and has written extensively in the areas of employment law, disability insurance, and tribunal practice and procedure.


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