A Comprehensive Guide to Constructive Dismissal in Canada

A constructive dismissal occurs when one of the parties under the employment agreement, usually the employer, makes a considerable change to a fundamental term in the employment agreement without the other party’s consent. Under these conditions, the employee has the option to consider him or her self terminated.

As a result, the departure of the employee will be considered a termination instead of a resignation and it will entitle the employee to the compensatory package that is associated with theterminationof an employee. Unfortunately there is no clear definition as to what exactly constitutes a “considerable” change. It is one of the reasons that, if you are considering a constructive dismissal, it might be a good idea to consult a lawyer who is more familiar with these types of cases and whether your unique situation would fall under the definition of a constructive dismissal.

Supreme Court

In 2015, the Supreme Court of Canada discussed constructive dismissals. The Supreme Court stated that a constructive dismissal can occur under one of the following conditions:

  • a single unilateral act by the employer that breaches an essential term of an employee's employment contract; or
  • a series of acts by the employer that, taken together, show the employer no longer intends to be bound by the employment contract.

The first branch of constructive dismissal requires an analysis of the employee's contract, and typically arises when the employer unilaterally changes an employee's compensation, duties or place of work. When this occurs, the employee must prove on a balance of probabilities that: (i) the employer breached an express or implied term of the employee's contract, and (ii) the breach substantially altered an essential term of the contract.

The second branch occurs when the employer's actions indicate the employer no longer intends to be bound to the employment contract. The second branch does not involve a breach of the contract; rather, it arises when the employer's conduct makes continued employment intolerable for the employee. The courts must take a retrospective approach and consider the cumulative effect of past employer actions on the employee. The test to be applied is whether, in light of all the circumstances, a reasonable person would conclude that the employer no longer intended to be bound by the terms of the contract.

Under the decision, it is clear that no matter which branch the employee feels that his or her constructive dismissal is under, he or she will need to study their employment contract to show whether a considerable deviation from the contract has been put into effect by the employer. It is also important to note that a constructive dismissal does not entitle the employee to a great or lesser severance than what is originally stated in the contract. Also, the employer has the right to make reasonable changes to the employment contract without it triggering a constructive dismissal. While there is no clear percentage as to how much of a change constitutes a constructive dismissal, a 15 percent change in compensation is likely to be considering a constructive dismissal.

Course of Action

According to the Ontario Court of Appeal, an employee has three options when faced with a considerable change to their contract by the employer.

Accept the change – however great the change, the employee can implicitly or explicitly accept the changes to their contract. An implicit acceptance of the changes might be if the employee does nothing after a certain period of time after the changes. Unfortunately there is no specific deadline specified and, as a result, an employee that did not leave his or her place of employment might have to prove that he or she did not accept the changes.

Reject the Change – By quitting, an employee can make a clear claim that they were constructively dismissed.

Remain employed – Under certain circumstances, the employee can inform his or her employer that they reject the changes. It is important to keep in mind that if the employer does not respond to the employee’s rejection, then the employer will be considered to have implicitly accepted the employee’s rejection.

It is easy to see how difficult thing can become in a constructive dismissal case. Considering that there are not a lot of definite deadlines, it can become difficult to asses your position as an employee. In these situations, it mightbe a good idea to contact a practicing attorney for a consultation.