Constructive Dismissal in Ontario

The Definition of Constructive Dismissal

The are two categories of constructive dismissal:

Category one: unilateral conduct by the employer that represents a fundamental breach of an express term of your contract of employment.

Here, the analysis is focused on whether your employer has made a unilateral change to a term of your employment contract, and whether that change is substantial enough to be considered a fundamental breach of your contract.

Again, the change must be substantial (in the sense that it is not a mere change of some minor rights or of a non-vital term of the contract of employment). A demotion or a reduction of compensation are examples of substantial changes.

The change must be unilateral. This means that the employer is making the change without your consent. Conversely, consent is provided if your employment agreement expressly permits the change, or if you agree to the change when it’s made, or if you wait too long to reject the change (the legal term for waiting too long is “acquiescence”). If you wait too long, then you have accepted or “acquiesced” to the change.

Category two: conduct that demonstrates that an employer no longer intends to be bound by the employment contract (in this case, it is not necessary that the employer breach an express term of your contract). In either category, the conduct can be a single act or a series of acts. A constructive dismissal is a termination of employment.

Here, the analysis is not really on whether there was a change to specific term of your employment. Rather, the focus is on whether the employer’s conduct makes continued employment intolerable for the employee. Examples include: abusive or harassing treatment.

What constitutes a constructive dismissal? Examples.

Is a demotion a constructive dismissal?

A demotion is more likely to be a constructive dismissal if it results in:

• loss of prestige and status [McKilligan v. Pacific Vocational Institute, 1981 CanLII 442 (BC CA)]
• loss of perceived and actual leadership [Jodoin v. Nissan Canada Inc., 2013 ONSC 4683 (CanLII)]
• a loss of future advancement [Reber v. Lloyds Bank International Canada, 1985 CanLII 153 (BC CA)]

A demotion is less likely to be a constructive dismissal:

• When the demotion is a minor one [Longman v. Federal Business Development Bank, 1982 CanLII 543 (BC SC)]
• Where the change is a “lateral” move [Winsor v. Canada Trust Co., 1993 CanLII 7754 (NL CA)]
• When it does not result in a clear loss of prestige
• When the employer is acting upon genuine economic necessity

Examples of demotions that were found (by the courts) to be constructive dismissals:

• Executive demoted to branch manager
• Demotion from general sales manager to salesman, with decrease in sphere of activity and responsibility
• Chef demoted to sous-chef
• Employee demoted to position he held earlier in career
• Organization change resulting in department head becoming second in command

Examples of demotions that were found (by the courts) NOT to be constructive dismissals:

• Employee given additional duties (from a different but related position)
• Change of job title to lower position but no loss of prestige owing to fact that the proposed project he was to work on meant greater importance to organization
• Change of position was because of economic necessity of employer
• Temporary assignment to new position

Is reduction in compensation a constructive dismissal?

A reduction in compensation is normally a constructive dismissal. This could mean a reduction of (for example):

• Fixed Salary
• Commissions (this includes a change in the commission formula that is likely to lead to lower commissions)
• Bonus (this includes a change to the bonus formula that is likely to lead to lower bonus)
• Benefits
• Perks like car allowance, payment of travel time, etc.

There are many ways that a change to an employee’s compensation structure can result in less compensation overall. Perhaps, the employer wants to lower the employee’s fixed salary coupled with an increased opportunity to earn commissions. Perhaps the employer wants to change the mode of payment from commissions to a lower fixed salary. Perhaps the employer wants to cap the amount of bonus. The possibilities are many.

We cannot discuss all the possibilities, but understand this: the law is concerned with the net remuneration the employee will get through a proposed change. What does this mean? It means, at the end of the day, will the proposed change result in less overall compensation? 

Minor changes in compensation will not be regarded as a fundamental breach of the contract of employment.

Is a reduction in my hours of work a constructive dismissal?

A reduction in hours of work is normally a constructive dismissal, and is closely related to “reduction in compensation”.

In one case, a reduction of hours from 40 to 29 per week was considered a constructive dismissal.

In another case, moving someone from full time to a part-time position was also a constructive dismissal.

Is a change in workplace location a constructive dismissal?

A change in the location of employment (i.e. a geographic transfer) is often a constructive dismissal.

However, the courts have been inconsistent on this issue.

Some courts have found that employees are not entitled to a job for life in a place of his or her choosing. Other courts have found that there is no presumption that an employer can unilaterally move their employees around.

That said, it appears that courts tend to take the position that with some exceptions, the location of work is a fundamental term of the contract of employment.

Is a temporary lay off a constructive dismissal?

A temporary layoff is generally considered a constructive dismissal, unless:

• the employment contract expressly permits a layoff (meaning there is an actual, valid clause in the contract that gives the employer the right to layoff the employee);
• layoffs are a well-known industry-wide practice;
• the employee has been laid off before; or
• the employee consents to the layoff.

Is harassment or abusive behaviour by my employer – or co-workers – a constructive dismissal?

An implied term of any employment relationship is that the employer will treat the employee with civility, decency, honesty, and respect. Therefore, any employer that engages in – or condones – conduct that makes continued employment impossible or intolerable will likely be liable for constructive dismissal.

Is a change in my responsibilities a constructive dismissal?

A unilateral change to responsibilities and duties of an employee can be a constructive dismissal. The analysis is a highly contextual one. The question, again, is in all the circumstances is the change so substantial?

On one hand, an employee is not entitled to have his or her responsibilities and duties fixed in stone. An employer should have some latitude, especially with respect to lateral or upward changes to an employee’s job.

What are some other examples of constructive dismissal?

Other examples of constructive dismissal include:

• Breach of employee’s privacy
• Sale of the Employer’s business
• Increase in Working Hours
• Change in Reporting Relationships
• Removal of Support and Infrastructure
• Negative Performance Reviews
• Performance Improvement Plans
• Unwarranted Discipline

What are my options if I have been constructively dismissed?

If you believe that you have been constructively dismissed, what can you do about it? Can you fight it? Can you raise the issue of constructive dismissal without resigning? What are your options?

Your options depend on your particular set of circumstances, but in general, someone who has been constructively dismissed faces a number of options:

1) Accept the change.

2) Advise the employer that he / she is willing to “try out” the change, without giving up their right to claim constructive dismissal. How long can the employee “try out” the change for? A reasonable time period. That time period is probably greater for longer-serving employees.

3) Reject the change and ask the employer to not implement the change or “undo” the change (if it has already been made).

4) Claim constructive dismissal and continue to work for the employer only to “mitigate” their damages.

5) Claim constructive dismissal, do not return to work, seek compensation.

Caution: Constructive Dismissal can be a very complicated matter, and it is highly recommended that you consult an experienced employment lawyer before you take any other steps. Every option has consequences, and your lawyer will be able to advise you on the most appropriate strategy.

Is there an obligation to continue working for my employer even after I have been constructively dismissed?

Sometimes, if the employee takes the position that he or she has been constructively dismissed and quits as a result, the employer will offer “re-employment” to the employee. The employer will either offer the old job back. Or, the employer will request that the employee take the new job until they find another job.

In certain circumstances, the law might expect you to continue working for your employer after being constructively dismissed. The rationale is that because a dismissed employee has an obligation to mitigate their damages, where the employment relationship is not too antagonistic, the employee should continue to work for the employer while searching for another job. Is this always possible? Of course not. An employee would never be expected to continue working for an employer where harassment or violence was present. Also, an employee would never be expected to continue working for employer if it would result in humiliation or where the atmosphere would be too antagonistic.

How much compensation will I get for a constructive dismissal?

A constructive dismissal is a without cause termination of employment. Your entitlements are no more (or less) than if you have been terminated outright. An employee’s termination entitlements are based on the following:

• For employees who are provincially regulated, Ontario’s Employment Standards Act, 2000 (“ESA”) provides for automatic, minimum entitlements. You get those whether or not you signed an employment agreement. Again, the ESA provides for minimum standards. Your entitlement to anything more depends on whether you have a valid employment agreement.

• If there is a valid, written employment agreement that expressly “caps” or “limits” your entitlements at a certain amount, then you are entitled to only that amount. The key here is that the employment agreement cannot stipulate that you will get less than ESA. That would not be a valid contract. If an employment contract clearly “caps” or “limits” your entitlements to those stated in the ESA, then you would only be entitled to the ESA minimums. [Caution: always have a lawyer review your employment contract]. Sometimes an employment agreement will provide for another amount (something more than the ESA minimums)

• Lastly, if you have no written employment agreement (either because one doesn’t physically exist or your lawyer is clever enough to “invalidate” the termination provision in it) then your entitlements are determined by the “common law”. With few exceptions, the “common law” measure of entitlements is more generous than ESA.

For an estimate of your entitlements, try our severance pay calculator.

How long does a constructive dismissal case take?

Generally speaking, we are able to resolve constructive dismissal cases without having to file a claim. We are typically able to negotiate a severance package for our clients based on negotiations alone. The matter should be resolved within a few weeks. Commencing a claim will, of course, increase the amount of time. If a claim if filed, then it will likely settle following further negotiations and / or a mediation. Commonly, that will be within a few months. Some matters take longer.

Can you get Employment Insurance (E.I.) if you are constructively dismissed?

This question assumes that you have actually left your job because of what you believe is constructive dismissal.

Normally, if you quit your job you are not entitled to employment insurance benefits. However, under the Employment Insurance Act, there are certain circumstances where an employee may voluntarily leave their employment without forfeiting their E.I. Those circumstances or reasons include:

• sexual or other harassment,
• obligation to accompany a spouse, common-law partner or dependent child to another residence,
• discrimination on a prohibited ground of discrimination within the meaning of the Canadian Human Rights Act,
• working conditions that constitute a danger to health or safety,
• obligation to care for a child or a member of the immediate family,
• reasonable assurance of another employment in the immediate future,
• significant modification of terms and conditions respecting wages or salary,
• excessive overtime work or refusal to pay for overtime work,
• significant changes in work duties,
• antagonism with a supervisor if the claimant is not primarily responsible for the antagonism,
• practices of an employer that are contrary to law,
• discrimination with regard to employment because of membership in an association, organization or union of workers,
• undue pressure by an employer on the claimant to leave their employment, and
• any other reasonable circumstances that are prescribed.

Visit our videos page or download a free guide to learn more about severance pay.

My employer closed one of its operations and ordered me to report to another location that was 1.5 hours away (one way). I could not have survived the commute. It was a constructive dismissal, and Ertl Lawyers negotiated a severance package to help me while I looked for a new job. Very happy with the result.


– V.C., Printing Industry, Vaughan

Have You Been Constructively Dismissed?

At Ertl Lawyers, when we take on a constructive dismissal case, our strategy often results in a favourable resolution of the matter based on the employee’s departure. Some of the things we can do include: helping you behind the scenes by providing you advice, writing a letter for you called a “ghost letter”, commencing negotiations with your employer directly, and (where necessary) commencing a legal claim on your behalf and driving it to a successful resolution.

Our help can make all the difference.

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