Constructive dismissal can arise when an employer makes a significant change to an employee’s employment without the employee’s agreement. Unlike a traditional termination, the employer may not explicitly tell the employee that their employment has ended. Instead, the employee may face a substantial change to an important term of employment and decide that they can no longer continue working under the new conditions.
Constructive dismissal can involve changes to compensation, job duties, working hours, workplace location or other fundamental aspects of employment. However, not every workplace change amounts to constructive dismissal. The specific employment contract, the nature of the change, the surrounding circumstances and the employee’s response can all be important.
What Is Constructive Dismissal
Constructive dismissal generally refers to a situation where an employer makes a significant unilateral change to a fundamental term or condition of employment, or otherwise acts in a way that effectively ends the employment relationship.
Ontario’s Employment Standards Act, 2000 recognizes constructive dismissal as a form of termination when an employer constructively dismisses an employee and the employee resigns in response within a reasonable period. The Ontario government identifies significant reductions in salary and significant negative changes to work location, hours, authority or position as examples that may constitute constructive dismissal.
The concept can also arise under common law. Whether a particular situation amounts to constructive dismissal depends on the facts and the terms governing the employment relationship.
How Does Constructive Dismissal Happen
Constructive dismissal can occur in several different ways.
An employer may make a substantial change to an important term of employment without obtaining the employee’s agreement. For example, an employer might significantly reduce compensation, substantially change an employee’s role or authority, move the employee to a materially different location or impose a major reduction in working hours.
Constructive dismissal can also arise in other circumstances, including situations involving serious harassment or abuse or an ultimatum requiring an employee to resign or be fired. The Ontario government’s employment standards guidance specifically recognizes these types of situations as potentially constituting constructive dismissal.
Can a Pay Cut Be Constructive Dismissal
A significant reduction in an employee’s salary or other compensation can potentially constitute constructive dismissal.
The size of the reduction is important, but compensation can involve more than base salary. Bonuses, commissions, benefits and other components of an employee’s compensation may also form part of the employment relationship.
Not every reduction in compensation will necessarily amount to constructive dismissal. The employee’s contract, the nature of the compensation, the extent of the reduction and the surrounding circumstances can all affect the analysis.
Employees who are told that their compensation will be reduced should carefully review their employment agreement and consider obtaining legal advice before accepting the change or resigning.
Can a Reduction in Hours Be Constructive Dismissal
A substantial reduction in working hours may potentially result in constructive dismissal.
For example, an employee who normally works a regular full-time schedule may face a significant and unexpected reduction in hours that materially changes the employment relationship.
The Ontario government identifies significant negative changes to hours of work as one example of a change that may amount to constructive dismissal.
However, employers and employees may have agreements that provide flexibility around scheduling or hours. The exact terms of the employment contract and the circumstances surrounding the reduction should therefore be considered.
Can a Change in Job Duties Be Constructive Dismissal
A change in job duties does not automatically amount to constructive dismissal.
Employers may have some ability to adjust an employee’s responsibilities as workplace needs change. The question is whether the change is significant enough to affect a fundamental term or condition of the employment relationship.
A substantial demotion, major loss of authority or significant change in the nature of an employee’s position may raise constructive dismissal concerns.
Employees should compare their original job duties with the new responsibilities and consider how substantial the change is before deciding how to respond.
Can a Change in Workplace Location Be Constructive Dismissal
A significant change to an employee’s workplace location can potentially raise constructive dismissal issues.
For example, moving an employee to a substantially different location may create a significantly longer commute or otherwise materially change the conditions under which the employee agreed to work.
The impact of the change and the terms of the employment agreement can both matter. A contract may address the employee’s normal workplace or give the employer some flexibility to change locations.
Employees who are asked to relocate should review the applicable contract and consider the practical and legal significance of the proposed change.
Can an Employer Change Your Employment Contract Without Your Agreement
An employer cannot necessarily change every term of an employment contract unilaterally.
A contract may contain provisions allowing certain changes, and some workplace adjustments may be reasonable exercises of an employer’s existing contractual rights. Other changes may represent a substantial departure from the original employment agreement.
The Ontario government’s policy guidance explains that constructive dismissal can arise where an employer unilaterally and substantially changes a fundamental or essential term or condition of employment without the employee’s consent.
Employees should therefore avoid assuming that every change is either automatically permitted or automatically a constructive dismissal.
Does Every Workplace Change Amount to Constructive Dismissal
No.
Employers can make many ordinary workplace changes without necessarily constructively dismissing an employee. Minor adjustments to duties, schedules, reporting relationships or workplace practices may not fundamentally alter the employment relationship.
The significance of the change is important. A change that appears minor in isolation may have a greater impact when considered alongside other changes.
Employees should consider the complete circumstances rather than relying only on the label used by the employer or employee to describe the change.
What Is the Difference Between Constructive Dismissal and Wrongful Dismissal
Constructive dismissal and wrongful dismissal are related but are not identical concepts.
In a traditional termination, the employer directly ends the employment relationship. In a constructive dismissal situation, the employer may make a significant change or engage in conduct that effectively ends the relationship, and the employee resigns in response.
A constructive dismissal can therefore lead to a claim involving wrongful dismissal or other contractual remedies. The legal analysis depends on the circumstances and the applicable employment contract.
Do You Have to Resign to Claim Constructive Dismissal
Generally, an employee alleging constructive dismissal must resign in response to the employer’s conduct in order for the situation to be treated as a termination under the ESA’s constructive dismissal provisions.
The Ontario government states that an employee must resign in response to the constructive dismissal within a reasonable period for it to constitute a termination under the ESA.
This does not mean an employee should immediately resign after receiving a pay cut, new duties or another workplace change. Whether the circumstances amount to constructive dismissal can be complicated, and the employee’s response can have significant legal consequences.
Should You Quit Your Job After a Major Workplace Change
Employees should be cautious about resigning after a significant workplace change.
Simply believing that an employer has treated an employee unfairly does not necessarily establish constructive dismissal. If an employee resigns and later cannot establish that a constructive dismissal occurred, the resignation may affect their ability to pursue certain remedies.
At the same time, an employee who continues working indefinitely under substantially changed terms may face questions about whether they accepted the new arrangement. The Ontario government’s guidance recognizes that an employee must resign in response to the constructive dismissal within a reasonable period.
Because timing and conduct can matter, employees facing a major change should consider obtaining legal advice before deciding whether to resign.
What If Your Employer Gives You a Choice to Quit or Be Fired
An employer may sometimes tell an employee to resign or face termination.
Depending on the circumstances, this type of ultimatum may contribute to a constructive dismissal. Ontario’s employment standards guidance specifically identifies situations where an employer gives an employee an ultimatum to quit or be fired and the employee resigns in response as an example of constructive dismissal.
The exact circumstances remain important. Employees should preserve written communications and other evidence surrounding the ultimatum and consider obtaining legal advice before deciding how to respond.
Can Harassment Lead to Constructive Dismissal
Serious workplace harassment or abuse can potentially contribute to constructive dismissal.
Constructive dismissal is not limited to changes in salary, duties or working location. Ontario’s employment standards policy guidance recognizes sustained harassment or abuse as circumstances that may give rise to constructive dismissal.
However, workplace conflict, disagreements or unpleasant working conditions do not automatically amount to constructive dismissal. The seriousness, duration and circumstances of the conduct can matter.
Can a Temporary Layoff Be Constructive Dismissal
A temporary layoff does not automatically mean that an employee has been constructively dismissed.
Ontario’s ESA contains specific rules governing temporary layoffs. The Ontario government also notes that a layoff may result in constructive dismissal if it is not permitted by the employment contract.
Whether a layoff constitutes constructive dismissal can therefore depend on the employment agreement, the length and nature of the layoff and the circumstances surrounding it.
Employees who have been laid off should avoid assuming that they have automatically been terminated or automatically constructively dismissed.
What Role Does Your Employment Contract Play
The employment contract can be extremely important in a constructive dismissal case.
The agreement may describe the employee’s salary, duties, workplace, hours, benefits and other conditions of employment. It may also contain provisions giving the employer certain rights to modify aspects of the employment relationship.
An employee should therefore review the entire agreement before concluding that a change is a constructive dismissal. A lawyer can assess the contractual language together with the employer’s actions and the surrounding circumstances.
What Should You Do After a Significant Workplace Change
An employee who believes their employer has substantially changed their employment should preserve relevant information.
Important documents may include the employment contract, job offer, pay statements, workplace policies, emails, letters, text messages and other communications concerning the change.
Employees should also document when the change was announced, what the employer said about the reason for the change, when it took effect and how it affected their compensation, duties, schedule or other working conditions.
Most importantly, employees should be cautious about resigning, signing a new agreement or accepting new terms without understanding the potential consequences.
Can You Negotiate With Your Employer
Employees may sometimes be able to negotiate after an employer proposes a substantial change.
For example, an employee may discuss compensation, duties, working arrangements, workplace location or other terms before accepting the proposed changes.
Negotiation can sometimes resolve a workplace dispute without ending the employment relationship. However, employees should understand the legal consequences of accepting a new arrangement before agreeing to it.
A written agreement can be particularly important where the parties are changing significant terms of employment.
What Compensation Can Be Available After Constructive Dismissal
If constructive dismissal is established, the employee may be entitled to compensation associated with the termination of employment.
Depending on the circumstances, this can involve statutory termination entitlements under the ESA, common-law reasonable notice or other contractual rights.
The Ontario ESA treats a constructive dismissal followed by a resignation within a reasonable period as a termination for purposes of its termination provisions.
The amount an employee may ultimately be entitled to receive cannot be determined simply by looking at the employee’s salary or length of service. The employment contract and the circumstances surrounding the termination can significantly affect the result.
What Happens to Benefits After Constructive Dismissal
Benefits can be an important part of an employee’s overall compensation.
Depending on the circumstances and applicable legal rights, compensation associated with termination may need to account for benefits or other forms of compensation that would otherwise have been received during a notice period.
Employees should therefore keep records of their health, dental, disability, life insurance and other workplace benefits when dealing with a potential constructive dismissal.
The treatment of benefits can depend on the employment contract, applicable legislation and the circumstances of the termination.
What If You Continue Working After the Employer Changes Your Terms
Continuing to work after a workplace change can create important legal questions.
An employee may need time to assess a proposed change, particularly when the employer has announced that new terms will take effect in the future. The Ontario government’s policy guidance recognizes that the reasonable period for responding to a constructive dismissal does not necessarily require an immediate resignation.
However, an employee’s continued conduct can also become relevant to whether the new terms were accepted. Employees should therefore consider obtaining legal advice before deciding whether to continue working under substantially changed conditions.
What Evidence Can Help With a Constructive Dismissal Claim
Evidence can help establish what the employment relationship looked like before and after the employer’s actions.
Useful records may include:
Employment contracts
Job offers
Pay statements
Bonus or commission records
Workplace policies
Performance reviews
Emails
Text messages
Letters from the employer
Records of schedule changes
Records of changes to job duties
Communications about relocation
Documentation concerning a layoff
Notes about important workplace conversations
Employees should preserve relevant records and avoid deleting communications that may later be important.
Are There Deadlines for Constructive Dismissal Claims
Potential employment claims can be subject to limitation periods and other deadlines.
The applicable deadline can depend on the nature of the claim, the legal forum and the circumstances. Different rights may also have different procedures and deadlines.
Employees should therefore avoid waiting unnecessarily before obtaining legal advice about a potential constructive dismissal. A delay can make it more difficult to preserve evidence or determine what legal options remain available.
Frequently Asked Questions About Constructive Dismissal
What is an example of constructive dismissal?
A significant unilateral reduction in salary, substantial change in working hours, major change in workplace location or significant reduction in an employee’s authority or position may potentially constitute constructive dismissal.
The specific facts and employment contract must be considered before determining whether constructive dismissal has occurred.
Can my employer reduce my salary?
An employer may not necessarily be able to impose a significant reduction in salary without consequences.
A substantial unilateral reduction in compensation can potentially constitute constructive dismissal, although the answer depends on the employment contract and circumstances.
Employees should consider obtaining legal advice before accepting a major pay reduction or resigning.
Can my employer change my job duties?
Employers may have some ability to modify an employee’s duties, depending on the employment agreement and circumstances.
A significant change to the nature, status or authority of an employee’s position may potentially raise constructive dismissal issues.
Can my employer make me work at a different location?
A workplace relocation does not automatically constitute constructive dismissal.
However, a significant change in location may potentially be relevant where it materially changes an important condition of employment. The original employment agreement and the practical impact of the relocation should be considered.
Do I have to quit immediately after a constructive dismissal?
Not necessarily.
Ontario’s ESA requires an employee to resign in response to the constructive dismissal within a reasonable period for the situation to constitute a termination under the Act. What constitutes a reasonable period depends on the circumstances.
Because resigning can have significant consequences, employees should consider obtaining legal advice before making that decision.
Is constructive dismissal the same as being fired?
No.
In a traditional termination, the employer directly ends the employment relationship. In a constructive dismissal situation, the employer’s conduct may amount to a termination even though the employee formally resigns in response to the employer’s actions.
Can a constructive dismissal happen without a pay cut?
Yes.
Constructive dismissal is not limited to compensation changes. Significant changes to working hours, workplace location, authority, position or other fundamental terms may potentially result in constructive dismissal. Serious harassment or abuse may also be relevant in some circumstances.
Can a temporary layoff be constructive dismissal?
A temporary layoff does not automatically constitute constructive dismissal.
The employment contract and the circumstances of the layoff can matter. Ontario’s government guidance specifically notes that a layoff may result in constructive dismissal if it is not permitted by the employment contract.
Can I work somewhere else after constructive dismissal?
An employee may need to look for comparable employment after an employment relationship ends. The legal consequences of accepting other work can depend on the circumstances, including the nature of the new employment and any applicable obligations.
Employees should consider obtaining legal advice about mitigation and other issues before making decisions that could affect a potential claim.
Should I speak with an employment lawyer before resigning?
If you believe your employer has fundamentally changed your employment, obtaining legal advice before resigning can be particularly important.
A lawyer can review the employment contract, assess the changes made by the employer and explain potential options before the employee takes an action that may affect their rights.
Get Advice About a Potential Constructive Dismissal
A major change to compensation, duties, hours, workplace location or another fundamental term of employment can create significant uncertainty for an employee. Constructive dismissal can be legally complex because the employee’s contract, the employer’s actions and the employee’s response can all affect the analysis.
If you believe your employment has been substantially changed without your agreement, consider obtaining legal advice before resigning, signing a new employment agreement or accepting materially different terms.
EmploymentLawyerToronto.ca provides employment law information and legal services for employees dealing with workplace issues in Ontario. An employment lawyer can review the circumstances and help determine what options may be available.
This page provides general information about Ontario employment law and is not legal advice. Employment law can depend on the specific facts of each situation.