A constructive dismissal claim can be based on a range of significant unilateral changes by an employer to the employee's job, such as as demotion... speak with an employment lawyer

What is a Constructive Dismissal in Ontario?

In employment law, a “constructive dismissal” means that an employer has acted in such a manner that it has essentially refused to perform its obligations under its employment contract with an employee. In other words, a constructive dismissal occurs when the employer changes the terms, conditions or working arrangements of an employee’s job in a really significant and negative way, as if the employer has unofficially dismissed the employee from their job.

In such cases, the employer’s conduct becomes a breach of the employment contract, and therefore a termination of the employment relationship (almost as if the employer had formally terminated their job “without cause.”). Another way to think of a constructive dismissal is to consider the employer having done something so negative and significant to the terms of employment that it has “broken” the employment relationship entirely.

Examples of Constructive Dismissal

Depending on the facts of each employee’s particular circumstances, some examples of constructive dismissal may include:

demotion (substantial reduction in an employee’s job responsibilities or status unilaterally imposed by the employer – even if there is no pay cut or change in job title)
failing to pay outstanding wages/salary, commissions or bonus pay
change in reporting functions (e.g., removing direct reports, or reporting to a less senior role)
relocation of the employee’s place of work
unpaid suspension from work
forced leave of absence from work
significant change in working conditions
significantly reducing the employee’s wages/salary (even if due to financial hardship)
unpaid temporary layoff (unless the employee signed an employment contract allowing it)
extremely toxic/poisoned work environment resulting from an employer’s decisions or actions relating to the employee’s job, such as a decision to change the work to be performed or the working conditions, to discipline the worker or to terminate employment
discrimination

It is important to note, however, that not every change to the terms, conditions or working arrangements of an employee’s job will amount to a constructive dismissal. To be considered a constructive dismissal, the change(s) to the terms of employment must be fundamental to the entire employment contract – and the test is always an objective analysis by the courts.

Minor changes will not trigger a constructive dismissal claim in Ontario. In fact, employers have the right to flexibility to make reasonable changes to their workplace and personnel, including when it comes to an employee’s job duties and responsibilities, as it sees fit in conducting its business operations.

In the (rare) circumstances where an employee is able to prove a constructive dismissal claim (and this is never an easy task), he/she may be able to justify an involuntary resignation, and demand payment of their outstanding wages, and appropriate termination pay and severance pay. In other words, the employee may be able to claim the employer’s conduct has effectively terminated their employment “without cause,” entitling them to a severance package or a claim for wrongful dismissal (even though his/her employment was never formally terminated).

As noted above, the employee’s test for proving a constructive dismissal is generally a difficult to meet, and the consequences are significant: If the employee is not able to prove the employer’s action meets the legal test of a constructive dismissal, they will be considered to have voluntarily quit. As a result, the employee will generally not be entitled to any severance package (and their eligibility to receive Employment Insurance benefits may also be impacted if they voluntarily quit their job without good reason). Accordingly, it is generally prudent for an employee to first discuss their specific case with an experienced employment lawyer before deciding on whether to quit and claim constructive dismissal).

An Employee’s Options When Faced with a Constructive Dismissal

When an employer makes a significant, negative to the terms, conditions or working arrangement of an employment contract, the employee has the legal right to treat the employment contract as terminated. However, the employee generally has a “reasonable” period of time to assess their changed situation and decide whether they could accept it, before losing their right to claim constructive dismissal by inaction. (However, just how long the “reasonable” length of time an employee can continue to work under the changed terms is unclear, and often disputed in court).

The courts have said that an employee has 3 choices available in responding to an employer who attempts to unilaterally change a fundamental term of the employment contract:

1. The employee can accept the employer’s unilateral change in the employment contract, in which case the employment will continue under the altered terms (in this case, the employee cannot later claim constructive dismissal);

2. The employee can reject the change and sue for damages for constructive dismissal if the employer persists in imposing the unilateral change to the employment relationship;

3. The employee can make it clear to the employer that he/she is rejecting the unilateral change to their job. In that case, the employer can either reject the employee’s challenge by terminating the employee with proper notice (or a severance package), and offering re-employment under a new employment contract. Alternatively, the employer can back down and permit the employee to continue to working on the original terms of employment.

An employee who decides to resign and claims constructive dismissal has the obligation to prove (on the balance of probabilities), that she was, in fact, constructively dismissed. The court will make this decision objectively based on its independent assessment of the circumstances of each case – that is, a court will review the specific facts in dispute and determine if the employer’s conduct was a significant, negative change (i.e., constructive dismissal). Among other things, the court will compare and contrast the terms and conditions of the employee’s job before and after the event complained of by the employee.

As discussed above, it is important to note that that Ontario employment law (and therefore the courts) apply an objective (rather than subjective test) when determining whether a constructive dismissal occurred. When applying an objective standard, the court will consider whether a “reasonable” stranger in the same situation as the employee would consider the change so significant that it fundamentally altered the employment relationship. The employee’s personal view of the situation (i.e., the plaintiff’s subjective view) is not decisive. Likewise, the employer’s motivation for implementing the unilateral change to the terms of employment is normally irrelevant (such as economic conditions) – unless the employer’s actions were discriminatory or done in bad faith.

Takeaways

For employees, claiming a constructive dismissal is generally risky business, and should generally be considered only with proper advice and guidance of an experienced employment lawyer reviewing your specific case. For instance, if it turns out the changes to the terms of employment were not significant enough to amount to a constructive dismissal, the employee will be found to have voluntarily resign or abandoned their job, and therefore not be entitled to a severance package.

If you are an employee who would like to review your situation about a potential constructive dismissal case, contact Bune Law today for a consultation and review.

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