constructive dismissal explained
09Mar

Constructive Dismissal in Ontario Explained

Constructive dismissal is a critical legal concept that both employees and employers in Ontario need to understand. It occurs when an employer fundamentally changes the terms of employment without the employee’s agreement, forcing them to resign.

This article explains what constructive dismissal is, how Ontario courts assess it, and what legal options are available for employees who believe they have been constructively dismissed.

What is Constructive Dismissal?

In Ontario, constructive dismissal happens when:

  1. An employer makes a significant, unilateral change to a fundamental term of employment.
  2. The change is so substantial that it breaches the employment contract.
  3. The employee feels forced to resign because of the change.

What Changes Can Lead to Constructive Dismissal?

Employers cannot fundamentally alter key employment terms without the employee’s consent. Some common changes that may lead to a constructive dismissal claim include:

  • Pay Cuts or Reduced Benefits

    • A significant salary reduction (typically 10% or more).
    • Removal of bonuses, health benefits, or pension contributions.

  • Job Duties and Position Changes

    • A demotion or a major change in responsibilities.
    • Assigning an employee duties far outside their expertise.

  • Work Location Changes

  • Unpaid Suspensions

    • Employers generally cannot suspend an employee without pay unless the contract explicitly allows it.
    • Even if allowed, the suspension must be reasonable and justified.

  • Toxic Work Environment

If any of these changes occur without the employee’s agreement, the employer may be legally liable for constructive dismissal.

Legal Framework for Constructive Dismissal in Ontario

1. Employment Standards Act (ESA)

Ontario’s Employment Standards Act, 2000 (ESA) sets minimum employment rights for wages, hours, termination notice, and severance pay.

  • While the ESA does not explicitly define constructive dismissal, it protects employees from illegal pay cuts, unpaid suspensions, and reductions in working hours.
  • Employees who believe their employer has violated ESA minimums can file a complaint with the Ministry of Labour.

However, most constructive dismissal cases are handled under common law, which provides stronger protections and higher compensation than ESA minimums.

2. Common Law and Court Decisions

Ontario courts rely on precedent cases to assess constructive dismissal claims. Two key cases are:

  • Farber v. Royal Trust Co. – Established that a fundamental change in job duties, pay, or working conditions can qualify as constructive dismissal.
  • Potter v. New Brunswick Legal Aid Services Commission – Introduced a two-part test for constructive dismissal:
    1. Did the employer unilaterally change a fundamental employment term?
    2. Would a reasonable person in the employee’s position see the change as a contract breach?

If the answer to both is “yes,” the court may find constructive dismissal occurred.

What Should Employees Do If They Experience Constructive Dismissal?

If you believe you have been constructively dismissed, follow these steps:

1. Do NOT Resign Immediately

  • Resigning too quickly may weaken your claim.
  • Instead, document the changes and gather evidence before making a decision.

2. Reject the Changes in Writing

  • Send your employer an email or letter objecting to the changes.
  • Keep a record of any responses or further actions by the employer.

3. Seek Legal Advice Immediately

  • A lawyer can assess whether you have a strong constructive dismissal case.
  • Legal counsel can help you negotiate severance or take legal action.

Employer Defences to Constructive Dismissal Claims

Employers may argue that:

  1. The changes were justified due to business needs.
  2. The employee agreed to the changes (expressly or by continuing to work).
  3. A written contract permitted the changes.

If an employee does not object in a timely manner, courts may rule that they “condoned” the change and lost their right to claim constructive dismissal.

Remedies for Constructive Dismissal in Ontario

1. Severance and Notice Pay

  • Employees may be entitled to severance based on:
    • Length of service
    • Age
    • Position
    • Availability of similar jobs
  • Severance pay can be as high as 24 months’ salary in some cases.

2. Bad Faith or Moral Damages

  • If an employer acted dishonestly, unfairly, or in bad faith, courts may award extra compensation to the employee.

3. Human Rights Claims

  • If a constructive dismissal is linked to discrimination (e.g., gender, disability, pregnancy, race, or age), the employee may file a claim with the Ontario Human Rights Tribunal.

4. Reinstatement in Limited Cases

  • While rare, some employees may be reinstated if wrongful termination is proven.

How to Take Legal Action for Constructive Dismissal

If you believe you’ve been constructively dismissed, legal action may involve:

  1. Negotiating a settlement with your employer.
  2. Filing a lawsuit in civil court for damages.
  3. Making a claim with the Ministry of Labour (only for ESA violations).

Each case depends on specific facts and contract terms, so legal advice is essential.

Contact Achkar Law for Help with Constructive Dismissal

At Achkar Law, we assist employees with constructive dismissal claims, severance negotiations, and wrongful termination cases. If you’ve been forced out of your job due to unfair employer actions, we can help you secure the compensation you deserve.

Why Choose Achkar Law?

  • Experienced Employment Lawyers handling constructive dismissal cases across Ontario.
  • Strategic Legal Advice to maximize severance and compensation.
  • Dedicated Representation for employees and professionals in workplace disputes.

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