Constructive Dismissal Claims in Ontario
Employment law in Ontario is a nuanced and sophisticated area of law, mainly because it involves many different legal rules from employment contracts to employment standards legislation to common law. One of the hotly contested areas is a claim of constructive dismissal.
Unlike traditional wrongful dismissal cases, where an employer formally terminates an employee’s job (usually without cause upon giving them a severance package), a constructive dismissal occurs when an employee feels compelled to resign due to the employer’s actions or conduct.
From a legal perspective, a constructive dismissal occurs when an employer’s actions render the employment relationship untenable or unable to continue, forcing the employee to involuntarily resign. As a result, this situation constitutes a reputation or breach of the employment contract, since the employer’s actions have fundamentally altered the terms and conditions of employment.
The courts have defined several circumstances that can result in an employee’s constructive dismissal, including:
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Substantial Changes to Employment Terms: Significant changes to an employee’s job duties, responsibilities, compensation, or work location without the employee’s consent can be grounds for constructive dismissal.
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Hostile or Workplace Harassment: When an employer creates or tolerates a hostile or harassing work environment, it can lead to constructive dismissal, as the employee’s mental and emotional well-being is compromised.
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Demotion or Reassignment: A demotion or reassignment that substantially diminishes an employee’s responsibilities and authority without justification can be considered constructive dismissal.
To establishing a constructive dismissal claim, an employee must generally be able to prove that:
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The employer’s actions were unilateral and significant: The employer’s actions must have significantly altered the essential terms of the employment contract.
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The employee was compelled to resign: The employee’s resignation must have been a direct and unavoidable response to the employer’s actions (in other words, the employee has no other practical recourse other than to resign in protest).
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The employee acted promptly: The employee must have resigned within a reasonable timeframe after the employer’s actions became apparent (otherwise, the employee may be found to have acquiesced or condoned the changes to their employment making a claim of constructive dismissal difficult).
Case Examples of Constructive Dismissal Claim
Here are some examples of court cases where an employee was successful in a constructive dismissal claim against a former employer in Ontario:
In this case that arose during the COVID-19 pandemic when many employers placed their employers on a temporary layoff, the court held that that O. Reg. 228/20: Infectious Disease Emergency Leave under the Employment Standards Act, 2000 (“ESA“) did not prevent common law constructive dismissal claims under common law regardless of the legislative changes under the ESA. Specifically, the court held that while the ESA regulation stated that an employer’s decision to reduce an employee’s work hours or wages as a result of the impact of the COVID-19 was not a constructive dismissal for the purposes of the legislation, and instead, a protected leave of absence, this would only apply if the employee had authorized a temporary layoff in an employment contract. Without such an employment contract, the employee was allowed to bring a constructive dismissal claim against the employer to obtain a severance package.
Colistro v. Tbaytel, 2019 ONCA 197
In this case, the court upheld a finding that an employer had constructively dismissed an employee because of its decision to re-hire a former employee who had sexually harassed the employee. In the court’s view, the employer’s actions made it unbearable for her to remain at work, such that its actions were equivalent to a situation where the employer had officially terminated her employment. In fact, even a single act by the employer can be proof of the employer’s “intention not to be bound by the contract”.
Jodoin v. Nissan Canada Inc., 2013 ONSC 4683
In this case, the court found that an employee was constructively dismissed as a result of a demotion. Specifically, the court found that the employee had experienced a substantial reduction in managerial responsibilities, removal from his office, and the perceived and actual loss of leadership in the company. In the court’s view, the employee “formerly had a leadership position, a responsible, successful Senior Manager position, and was demoted to one with no management at all.”
Filice v. Complex Service Inc., 2018 ONCA 625
In this case, the court confirmed that suspending an employee without pay (also called an “administrative suspension”) can result in an employee’s constructive dismissal under common law. As this decision made clear, employers do not have absolute freedom to impose administrative suspension anytime they wish; otherwise, they may face legitimate constructive dismissal claims from employees seeking a financial severance package.
Palumbo v. Research Capital Corporation, 2002 CanLII 34676
In this case, the court held that that it was not open to the employer to assign duties formerly held exclusively by the head of corporate finance (Palumbo) to another employee, in effect making the role of head of corporate finance a shared one. In the court’s view, “any assigned duties must … have been in keeping with Palumbo’s clear role as head of corporate finance,” and by obligating Palumbo to share that role, the employer had unilaterally demoted him.
Conclusion
If you are an employee who believes you have been constructively dismissed by your employer, seeking legal counsel promptly is crucial. At Bune Law, an experienced employment lawyer can you with understanding and assessing your situation, determine if you have a valid claim, and guide you through the legal process. This may involve negotiating a severance package with your employer to pursuing a constructive dismissal claim.
Call Employment Lawyer Toronto Today
If you are an employee who believes you were wrongfully dismissed from your employment with or without a fair severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed and negotiated improvements to many severance packages. 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.