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A Guide to Constructive Dismissal in Ontario

Chad Chartwell 2016-05-20

People use a number of different terms to describe where employment is terminated. These include “dismissed,” “fired,” “let go,” and “permanently laid off.” Under the Employment Standards Act, a person’s employment is terminated in one of three ways:
a)    if the employer stops employing or dismisses an employee;
b)    lays an employee off for a period that is longer than a “temporary layoff”; and
c)    “constructively” dismisses an employee and the employee resigns because of it within a reasonable time.

This guide will provide an overview of what constructive dismissal is and what you can do.

Constructive Dismissal
If an employer makes a substantial change to a person’s employment without his or her consent, or shows no intention to be bound any longer by the terms of the employment contract signed by the employee, the employee has the option of treating his or her employment as being terminated. His or her departure will not be considered as a resignation but a dismissal. This is important because an employer who is found to have constructively dismissed an employee will have to provide that employee with a severance package.

What is Considered Constructive Dismissal
The change or changes made to the terms of employment must affect the very heart of the employment contract in order to be considered a constructive dismissal. Minor changes will not be considered as a constructive dismissal because an employer has a right to make reasonable changes to a person’s responsibilities and duties in order to adapt to changing conditions and manage a business.

In a court case in 2015, the Supreme Court of Canada decided that there are two tests that will determine when a constructive dismissal has occurred:

[1] when the employer’s single act like demoting the employee breached the employment contract in such a way that it substantially altered the essential terms of the contract; or

[2] when the employer’s ongoing conduct shows an intention to no longer be bound by the employment contract as seen by a reasonable person.

Common Types of Changes that Trigger a Constructive Dismissal
The most common types of changes that might trigger a constructive dismissal include:
•    requiring the employee to move to a different location;
•    significantly reducing the employee’s compensation;
•    failing to pay the employee;
•    demoting the employee, changing the employee’s reporting relationships, or reducing the employee’s job responsibilities;
•    requiring the employee to work in a poisoned work environment; or
•    laying off the employee.

An Employee’s Options
An employee has three options when responding to his or her employer’s unilateral change to the terms of employment:

[1] to accept the change

[2] to reject the change, quit within a reasonable amount of time, and claim that he or she has been constructively dismissed

[3] in some circumstances, remain employed but notify the employer that he or she has rejected the change to the employment contract. If the employer doesn’t respond to the employee’s rejection, the employer will be considered to have acquiesced to the position of the employee.

What is a Reasonable Amount of Time
If the employee wants to claim constructive dismissal the employee must normally quit from the employment within a reasonable period of time of the employer’s change. What a reasonable amount of time is difficult to determine since case law is not consistent. Generally, the employee is allowed a reasonable period of time to test the new conditions of the employment before having to make a decision. If he or she doesn’t resign after that reasonable period, he or she will be found to have implicitly accepted the change.

An employee who quits and claims constructive dismissal has to prove on the balance of probabilities that he or she was constructively dismissed. A court will review the case and determine if a constructive dismissal has occurred. For those of you who are not experienced or do not feel confident handling the legal case on your own, try talking to a professional employment lawyer for help. There are many qualified employment lawyers in Toronto, including the Whitten and Lublin LLP team, so be sure to seek the help that you need.

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