What Is Constructive Dismissal?

By Matt Lalande in Constructive Dismissal, Employment Law, Wrongful Dismissal on May 25, 2022

A constructive dismissal occurs where an employer unilaterally imposes a fundamental change to the terms and conditions of your employment without advance notice and without your consent.

Remember, the employment relationship is not a static arrangement and employers frequently find themselves seeking to make changes to their employees’ terms and conditions of employment (e.g., your employer may wish to revise compensation arrangements, give you the responsibility of 3 positions on top of your own, alter your hours of work, change reporting relationships, re-organize your sales territories, or introduce new company policies).

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While some changes may be made at your employer’s discretion and with little fear of legal repercussions, others changes that your employer imposes present the risk of “constructive dismissal” claims — that is, the changes to your job without your consent may invite you to take the position that the terms and conditions of your employment have been changed so much that the employment relationship has effectively been terminated and that your are owed wrongful dismissal compensation.

If you believe you have been constructively dismissed, it’s important that you speak to a qualified Hamilton employment lawyer to discuss your situation. Our employment lawyers have been not only serving employees in the greater City of Hamilton since 2003, but we have also in been serving employees the entire surrounding areas from Mississauga to Niagara with all sorts of termination issues. Remember, it’s important to get the severance you are OWED and not the severance your employer WANTS you to have.

What is the test for Constructive Dismissal?

Our Supreme Court of Canada revisited and clarified the common law test for constructive dismissal in a case called Potter v. New Brunswick Legal Aid Services Commission. The Court explained that the test for constructive dismissal has two branches:

The first branch

The first branch, which requires a review of the specific terms of the employment contract, has two steps:

1) the employer’s unilateral change must be found to constitute a breach of the employment contract;
2) if it does constitute such a breach, it must be found to substantially alter an essential term of the contract.

To determine whether a breach has occurred, the Court stated that a determination must be made as to whether the employer has unilaterally changed the contract. If your employer has the authority to make the change or you consent to the change, there will be no breach because the change will not be considered a unilateral act.

To determine whether a breach substantially altered an essential term of your contract, a court must determine “whether a reasonable person in the employee’s circumstances would have perceived, inter alia, that the employer was acting in good faith to protect a legitimate business interest, and that the employer’s act had a minimal impact on him or her…”

The second branch

The second branch of the test for constructive dismissal will be met where the employer’s conduct was such that a reasonable person in the same situation as you would conclude that they were no longer bound by the employment contract.

Thus, constructive dismissal can take one of two forms. It can either result from a single unilateral act that serves to breach an essential term of your employment contract (i.e., first branch) or from a series of acts that, taken in their totality, demonstrate that the employer no longer wishes to be bound by your employment contract (i.e., second branch).

What can give rise to a constructive dismissal case?

The following changes to en employee’s employment contract may give rise to a claim for constructive dismissal:

• a material reduction in compensation and/or benefits;
• a demotion resulting in loss of personal status or prestige;
• changes in titles, duties, and reporting relationships;
• changes in geographical location of employment;
• a layoff; or
• a poisoned work environment, including, without limitation:
• persistent and unwarranted criticism from a superior;
• abusive treatment that renders an employee incapable of fulfilling the employee’s employment duties;
• forced resignation;
• harassment, including racist, dehumanizing, derogatory, and sexist comments from an employer; and/or
• personal acrimony between the employee and the employee’s superiors.

The Employee’s Duty to Mitigate

An employee who has been constructively dismissed has a duty to mitigate any damages. If an employee rejects a reasonable opportunity to mitigate or otherwise fails to take reasonable mitigation efforts, the employee’s entitlement to damages will be compromised.

In appropriate circumstances, an employee’s duty to mitigate can include continuing to work for the dismissing employer while searching for new employment. The duty to mitigate by accepting a position with a former employer exists where:

• viewed objectively, there are no barriers to continuing to work such as acrimonious relationships, substantially different or demeaning work conditions or an atmosphere of hostility, embarrassment or humiliation; and
• a reasonable person in the employee’s position would have accepted the offer of re-employment.

To trigger this form of mitigation, the employer must present the employee with a clear opportunity to work after the employee has claimed wrongful dismissal.

Risks of Resignation

In bringing a claim of constructive dismissal, you as the employee bear the burden of proving that the terms and conditions of your employment were altered so significantly that you had no choice but to resign.

If you meet this burden, you will be entitled to wrongful dismissal damages equal to the pay in lieu of notice that you would have received on termination of employment without cause.

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However, there is always a risk that you might not be able to meet this burden, in which case a court will find that you voluntarily resigned. If you are found to have voluntarily resigned (or if the court holds that you should have accepted the change and remained in employment to mitigate damage), you will not be entitled to pay in lieu of notice. Further, if the resignation is deemed voluntary, the employee may not be entitled to receive Employment Insurance.

Employee Condonation of Constructive Dismissal

Following a fundamental change to the terms or conditions of your employment, your will be afforded a reasonable period of time to “try out” the new arrangement, during which you will retain the right to reject your employer’s change. Condonation occurs where an employee either expressly or implicitly decides to accept the fundamental change and remain employed.

There are two types of condonation:

• Express Condonation – if the employee may expressly condone the fundamental change, in which case the employment will continue under the altered terms and
  
• Implied Condonation – if the employee continues to work under the new arrangement without protest beyond the reasonable trial period, the employee’s apparent acceptance will be deemed to represent actual condonation at law.

There are no objective means of determining exactly when the reasonable trial period has ended and condonation crystallizes. Depending on the nature of the change that has been implemented and when the employee fully appreciates the impact of the change, that threshold may not be crossed for several months.

There are a variety of factors to be considered in determining if an employee has condoned a fundamental change in the terms or conditions of employment. These include, without limitation:

• how long the employee continued working under the new arrangement without objection;
• whether the employee clearly objected to the change;
• whether the employee expressly accepted the new terms of employment;
• whether the parties had an understanding that the employee’s acceptance of the new terms of employment was merely temporary; and
• based on an objective analysis, whether or not a person in the position of the parties would believe that the employee had consented freely to the change.

Have you been Constructively Dismissed from your job? Contact our Hamilton Employment Lawyers today.

If you believe that you’ve been constructively dismissed from your job call Hamilton Employment Lawyer Matt Lalande today for your free consultation. Since 2003, Matt Lalande has represented hundreds of employees who have been terminated all over Ontario.

While there are many employment lawyers who Our Hamilton Employment Lawyers only specialize in representing employees who have been fired. Call us today at 1-844-LALANDE or local throughout Southern Ontario at 905-333-8888 to discusss your constructive dismissal. Alternatively, you can email us confidentially through our website and we will be happy to get right back to you.