What is Constructive Dismissal?

In Ontario, the definition of constructive dismissal is when an employee resigns because of a  breach of their employment contract by their employer. In the result, if the employer's breach was serious, the employee gets severance as if they were let go from work. 

Some employees would be surprised to hear that they can quit their jobs and still be entitled to a termination / severance package, potentially other employment law remedies and EI.

There are circumstances in which the employer, although not acting explicitly to terminate an individual's employment, alters the employment relationship's terms and conditions to such a degree that an employee is entitled to regard the employer's conduct as a termination, and claim wrongful dismissal, just as if they had been let go without any notice or termination pay in lieu of notice.

Constructive dismissal in Ontario arises from the failure of the employer to live up to the essential obligations of the employment relationship, regardless of whether the employee signed a written employment contract. Employment law implies into employment relationships a common-law set of terms and conditions applicable to all employees. For example, once agreed upon, wages are implicitly locked in by the common-law of contract as an essential term of the employment relationship. In this regard, it is a constructive dismissal if an employer fails to pay an employee. Read more on the Ontario government website.

An employer's breach of the employment contract releases the employee from their obligation to perform under the contract, and thus treat themselves as dismissed. Hence, a constructive dismissal always becomes a wrongful dismissal.

Changes to the Employment Relationship

Typically, the first way to claim constructive dismissal involves an employer making substantial changes to the employment contract, such as:

  • a demotion;
  • altering the employee’s reporting structure, job description or working conditions;
  • lowering an employee’s compensation;
  • changing hours of work;
  • imposing a suspension or leave of absence; and
  • relocating the employee’s workplace.

In addition, failure on the part of an employer to provide Ontario employment standards (i.e. overtime pay, vacation pay, etc.), can result in a constructive dismissal.

See our blog post on constructive dismissal examples for more information.

Nevertheless, for an employee to have a successful case for constructive dismissal, the employer's breach must be fundamental. What is "fundamental" depends on the circumstances, and not all changes to the employment relationship give rise to a constructive dismissal. For example, administrative, i.e. non-disciplinary, suspensions might not amount to a constructive dismissal if imposed in good faith and justified by legitimate business reasons (i.e lack of work). As well, a small reduction in salary, in tough times, and administered rationally, might not be a constructive dismissal. Contact a lawyer specializing in employment law for advice on whether a change to the employment relationship is fundamental enough to claim constructive dismissal.

Toxic Work Environments

An employee may also be able to claim a constructive dismissal based on an employer's conduct, rather than a change to a specific or implied term of the employment contract. Here, the second way to claim constructive dismissal examines whether the employer's (or employee of the employer) course of conduct, or even a single incident, demonstrates an intention to no longer be bound by the written or implied employment contract. An example of this kind of constructive dismissal is a "toxic work environment". In this regard, if a work environment is so poisoned that a reasonable person wouldn't be expected to return, then constructive dismissal is likely.

A toxic work environment is classically defined as  unjustified criticism as well as vague and unfounded accusations of poor performance, especially where authority and respect with co-workers had been seriously undermined and compromised. Another example of toxic work environment is where the employer fails to prevent workplace harassment.

Is a Layoff a Constructive Dismissal (COVID-19)?

Caution - Employees should not Quit without Consulting an Employment Lawyer

Employees should contact an employment lawyer or law firm specializing in constructive dismissal before they treat themselves as constructively dismissed and quit their jobs. The onus is on the employee to prove constructive dismissal as opposed to resignation, and if they fail, they are entitled to nothing, just as if they had voluntarily quit. At the same time, employees are cautioned that they should quickly object to substantial changes to the employment contract or incidents of employer misconduct otherwise they may be seen by the courts to have acquiesced to the fundamental breach of the employment relationship.

Therefore, it is prudent for employees to determine whether or not they have a case for constructive dismissal, and allow their lawyer to negotiate on their behalf, before suddenly leaving secure employment.

Dutton Employment Law is an employment law group in Ontario which helps employees with constructive dismissal.

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