Constructive Dismissal – The Basics

Author: David Ertl, Employment Lawyer

Constructive dismissal occurs when the employer decides to no longer be bound by the contract in place with the employee and makes a unilateral, fundamental change to the employment relationship. When this occurs, the employee has two options: 1) accept the changes and continue to work under the new regime, or 2) treat the changes as a breach of the employment contract and sue for constructive dismissal.

Constructive dismissal is a term that represents a situation where a wrongful termination has occurred but the employee has not actually been formally fired. The employee is taking the conduct of the employer as a termination rather than the employer outright terminating them.

In order to be considered a constructive dismissal, the employer must have made a change that “substantially alter(s) an essential term of the contract of employment,” in accordance with the decision of Potter v. New Brunswick (Legal Aid Services Commission) (2015), 381 D.L.R. (4th) 1 (S.C.C.). This term in the contract can either be an express term (one actually written down in the contract) or an implied term (one that is not actually written in the contract but that applies nonetheless).

Common examples of constructive dismissal include substantial changes to pay/salary, change in work location (ex: from Toronto to Vancouver), a demotion in position and removal of significant benefits. Additionally, constructive dismissal can take the form of certain behaviour/treatment in the workplace such as harassment or discrimination, as it is an implied term of all employment contracts that employees be treated with respect and work in a safe environment.

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