Constructive Dismissal in Ontario Employment Law
Many of us have heard of a “constructive dismissal”. Quite often, we receive calls from employees inquiring about whether they have a valid constructive dismissal case. In fact, sometimes the employees are adamant that they want to sue their employer for constructive dismissal as a result of changes to their job. The issues though, as it is typical in any workplace disputes, “what makes you so sure?” Ontario employment law is complicated and always changing, so there is no one-size-fits-all approach to any legal claims, especially a constructive dismissal claim.
In any case, it is important to always seek the advice of a constructive dismissal lawyer when dealing with your workplace issues (e.g., termination of employment).
What Does a Constructive Dismissal Mean?
A constructive dismissal refers to a major change by an employer to an employee’s terms and conditions of employment. In other words, it may be proven if an employer unilaterally changes a fundamental aspect of the employment relationship with an employee without their permission (or without at least providing them with prior notice). In such cases, an employee is entitled to sue to receive financial compensation in a severance package.
How do the Courts Determine if there is a Constructive Dismissal?
A court will find that an employer has constructively dismissal when an employer’s behaves in a way that makes it clear it has no intention of abiding by its responsibilities under the employment contract. A constructive dismissal can be proven in one of two ways:
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- a single unilateral act by an employer that breaches an express or implied (essential) term of the contract; or
- a series of acts by an employer that, taken together, show that the employer intended to no longer be bound by the contract. In other words, an employer’s treatment of an employee makes their continued employment objectively intolerable.
An employee has a right, but not an obligation, to treat the employment contract as being at an end when the employer commits a present or anticipatory breach of the fundamental term of the contract.
As the Court noted, however, “each constructive dismissal case must be decided on its own facts, since the specific features of each employment contract and each situation must be taken into account to determine whether the essential terms of the contract have been substantially changed” (Farber v. Royal Trust Company, 1997 CanLII 387 (SCC), [1997] 1 S.C.R. 846).
What are Examples of a Constructive Dismissal?
There are various types of behaviour by an employer that can result in a constructive dismissal, but they must be significant changes in one of the following areas:
Demotion
Any substantial reduction in an employee’s job responsibilities or status that is unilaterally imposed by the employer can constitute constructive dismissal, even if there is no accompanying reduction in the employee’s income (Jodoin v. Nissan Canada Inc., 2013 ONSC 4683 (CanLII)) or job title (Dick v. Canadian Pacific Ltd., 2000 NBCA 10 (CanLII)). However, it is not necessary that the demotion occur all at once. Chipping away at an employee’s job responsibilities or status through successive incremental changes may well suffice to constitute constructive dismissal (Miller v. ICO Canada Inc., 2005 ABQB 226 (CanLII)).
In Palumbo v. Research Capital Corporation, 2002 CanLII 34676 (ON SC), the court held that it was not open to an employer was not allowed to assign duties formerly held exclusively by the head of corporate finance to another employee, in effect making splitting the employee’s role among two separate people. “Any assigned duties must … have been in keeping with Palumbo’s clear role as head of corporate finance,” and by forcing Palumbo to share that role, the employer had unilaterally demoted him, amounting to a constructive dismissal.
Pay Decrease
In Davies v. Canadian Satellite Radio Inc., 2010 ONSC 5628 (CanLII), the court found a constructive dismissal as a result of an employer’s decision to reduce the employee’s annual salary from $250,000 to $150,000 and removal of bonus pay. In Doran v. Ontario Power Generation Inc., 2007 CanLII 49486 (ON SC), the court found a constructive dismissal as a result of an employer’s decision to reduce an employee’s total compensation structure by 14-17% (in conjunction with a change in job responsibilities). An employer’s unilateral elimination of negotiated per-project bonuses previously paid to an employee has been found to be constructive dismissal (Piron v. Dominion Masonry Ltd., 2012 BCSC 1070 (CanLII)), as can an employer’s repeated failure of an employer to pay a substantial bonus owing to an employee on specified dates (Ilkay v. Acadia Motors Ltd., 2006 NBCA 103 (CanLII), 276 D.L.R. (4th) 762 (N.B.C.A.)). Lastly, an employer’s unilateral change in the method of remuneration such as a switch from an hourly pay rate to piecework may also amount to constructive dismissal (Ciciretto v. Embassy Cleaners Inc., 1999 CanLII 7324 (ON CA). However, in one case, the court held that if an employment contract makes it clear that an employee’s income or commission level could be adjusted in the future by the employer (or it otherwise gives an employer permission to make such a pay reduction), it would not amount to a constructive dismissal (BMO Nesbitt Burns Inc. v. Bond, 2002 CanLII 3184 (ON SC)).
Change in job duties, responsibilities and functions
In Davies v. Canadian Satellite Radio Inc., 2010 ONSC 5628 (CanLII), a court found that a Vice President of a company was constructively dismissed when his salary was dramatically reduced; he was forced to report to a lower-ranked executive (Executive Vice-President, instead of President); and his authority over programming was reduced.
Workplace harassment, abuse and discrimination
An employee may claim constructive dismissal based on serious and wrongful behaviour, including workplace harassment, abuse or a toxic work environment, on the basis that:
(a) such mistreatment makes the employee’s continued employment intolerable. Similarly, a court could find constructive dismissal, or
(b) such circumstances violate an essential term of their employment contract requiring employers to always treat the employee with civility, decency, respect, and dignity.
In such cases, the employer has clearly failed to fulfill its obligation to prevent an intolerable or toxic work environment caused by the abusive or harassing behaviour of co-workers, or otherwise to ensure hat the work atmosphere is conducive to the well being of its employees. Where an employee’s work environment so hostile, embarrassing or forbidding as to render it impossible for the employee to provide competent work performance impossible or continued employment intolerable, an employee is entitled to treat the employment contract as at an end, and to recover at least damages in lieu of reasonable notice.
In Paitich v. Clarke Institute of Psychiatry (1988), the employee was justified in quitting their after persistent and unfounded criticism by a supervisor. In Qubti v. Reprodux Ltd., 2010 ONSC 837 (CanLII), the employee justifiably resigned after years of verbal abuse including sexual and racist slurs and other demeaning remarks by management “sufficient to create a hostile and poisoned work environment which caused him to seek medical attention for mental stress”. In Disotell v. Kraft Canada Inc., the employee was repeatedly harassed in the workplace with degrading, impolite and derogatory comments by a number of fellow employees). In Sweeting v Mok, 2015 ONSC 4154 (CanLII), a long-service employee subjected to condescending, aggressive, and hostile behaviour on part of employer during meeting, including shouting, finger pointing, profanity, and ultimately a direction to “get out” coupled with an insult about her personal appearance). In Strizzi v. Curzons Management Associates Inc., 2011 ONSC 4292 (CanLII), the employee was subjected to abusive and threatening tirade by owner during phone conversation, including name-calling, false accusations of ruining the business, and threats of “brutal” legal retaliation if the employee quit. In all theses cases, the court found the employers’ mistreatment of the employee resulted in a constructive dismissal.
Change in reporting relationships
In Davies v. Canadian Satellite Radio Inc., 2010 ONSC 5628 (CanLII), the court found a constructive dismissal as a result of an employer’s decision to force a Vice President to report to an Executive Vice President (instead of the President) and reduce his decision-making responsibility.
Work relocation
While no every change to an employee’s place of work will constitute a constructive dismissal, the courts have found as such when the change is significant. In Reynolds v. Innopac Inc., 1998 CanLII 3558 (ON CA), held that an employer’s requirement that a senior executive transfer from Toronto to Vancouver constituted a unilateral substantial change to an essential term of his employment contract. The reason for the court’s finding was that the executive was being required to move a great distance, away from the area where he had lived all his life; that the new job would require frequent travel from the west coast to manufacturing plants in the east, substantially changing the way in which he carried out his job and the amount of time he could spend with his family; and that, in addition to his regular responsibilities, he would be required to perform additional, undefined duties over longer hours since the employees in the Vancouver office started work early in the morning to enable them to deal with matters in the Toronto and New York time zone.
Working Conditions
A significant or demeaning change in an employee’s working conditions may constitute constructive dismissal even if the employee’s remuneration remains unchanged. For example, in Bowen v. Ritchie Brothers Auctioneers Ltd., 1999 CanLII 9306 (ON CA), the court found a constructive dismissal a result of the employer’s decision to offer the employee a new position where the working conditions were so unappealing that only part-time employees had been assigned to the position previously. In that case, the court held that: “for an employee who had worked for several years in the main office almost adjacent to the manager, relegation to a tiny, unheated shed at the periphery of the premises was a clear signal that the company no longer valued Bowen’s services and hoped he would quit.”
Temporary layoff, forced leave of absence and unpaid suspension from work
In the absence of an express or implied term in the contract of employment permitting an employer to lay-off an employee temporarily without pay, a lay-off is generally considered to be a constructive termination of the contract triggering the employee’s right to notice even if the employer undertakes to recall the employee upon work being available and has no intention to repudiate the employment relationship (Elsegood v. Cambridge Spring Service, 2011 ONCA 831 (CanLII)). To this end, without a temporary layoff permission in an employment contract, it does not matter whether or not the employee followed the timelines under the Ontario Employment Standards Act, 2000; it would likely still constitute a constructive dismissal under common law (Bevilacqua v Gracious Living Corporation, 2016 ONSC 4127 (CanLII)).
Change in an employee’s work hours (e.g., work schedule, changing an employee status from full-time to part-time, etc.).
In Hilton v. Norampac Inc. 2003 CanLII 11626 (ON CA), a court held that an employer had constructively dismissed a 15-year employee-foreman by firing him for refusing to agree to a new “on-call” requirement imposed on all foreman. In Davies v. Canadian Satellite Radio Inc., 2010 ONSC 5628 (CanLII), the court found a constructive dismissal as a result of an employer’s decision to change an employee from full-time status to part-time status.
Consequences of Constructive Dismissal
If an employee is successful in proving a constructive dismissal, they can sue for wrongful dismissal for damages (compensation) for breach of the implied term in the employment contract to give reasonable notice of an intention to terminate the relationship in the absence of just cause (of a severance package).
Call a Constructive Dismissal Lawyer Toronto Today
If you were terminated from your employment with or without severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed many severance packages and are skilled at negotiating improvements. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.