constructive dismissal in ontario
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Table of Contents
Can Your Employer Force You to Resign Without Actually Firingy You?
Understanding your employment rights when your employer makes significant changes to your job, salary, responsibilities or working conditions.
Have you ever been told by your employer that your salary is being reduced, your position is changing, your responsibilities are being taken away, or you must accept new working conditions that you never agreed to?
Perhaps your employer has made your workplace so uncomfortable that you feel you have no choice but to resign.
You may have legal rights even if your employer has never formally terminated your employment.
Under Ontario employment law, these circumstances may amount to constructive dismissal.
What Is Constructive Dismissal?
Constructive dismissal occurs when an employer does not formally terminate an employee but instead makes a substantial unilateral change to an essential term or condition of employment, without the employee’s consent.
In other words, an employer may effectively terminate an employment relationship through its conduct, even if it never expressly tells the employee that they are fired.
Constructive dismissal may also arise when an employer engages in conduct that demonstrates an intention no longer to be bound by the employment agreement, making continued employment objectively intolerable.
For example, imagine that you have worked as a manager for a company for five years, earning $100,000 annually. Your employer suddenly reduces your salary to $70,000 without your agreement and tells you that you must accept the change if you wish to continue working.
Although your employer has not terminated your employment, the substantial reduction in your compensation may amount to constructive dismissal.
The law recognizes that an employer cannot necessarily avoid its termination obligations simply by keeping an employee on the payroll while fundamentally changing the terms of employment.
What Are Some Common Examples of Constructive Dismissal?
Not every disagreement or workplace change amounts to constructive dismissal. However, certain employer actions may give rise to a constructive dismissal claim.
- Significant Reduction in Salary
A substantial reduction in an employee’s salary without their consent may constitute constructive dismissal.
For example:
- Your annual salary is reduced from $90,000 to $65,000.
- Your employer eliminates a substantial contractual commission or compensation component.
- Your employer significantly reduces your regular working hours, resulting in a substantial reduction in income.
A minor or temporary adjustment will not automatically constitute constructive dismissal. The extent of the reduction, the employment agreement and the surrounding circumstances must be examined.
2.Demotion or Reduction in ResponsibilitiesAn employer may constructively dismiss an employee by significantly reducing their professional responsibilities, authority or position.
For example:
- You are a senior manager, but your employer removes your management responsibilities.
- You are transferred to a substantially lower-ranking position.
- Your supervisory authority is removed and your former subordinates become your supervisors.
- You are assigned duties that are fundamentally different from the position for which you were hired.
Importantly, an employee does not necessarily need to experience a salary reduction to have a constructive dismissal claim. A substantial change in professional status or responsibilities may be sufficient.
3.Significant Change in Working HoursA substantial and unilateral change to an employee’s working schedule may also amount to constructive dismissal.
For example:
- You were hired to work regular daytime hours, but your employer suddenly requires you to work overnight shifts.
- Your regular working hours are substantially reduced.
- Your employer changes your schedule in a manner that fundamentally affects the employment arrangement.
Whether such a change constitutes constructive dismissal depends on the employment agreement, workplace practices and the seriousness of the change.
4.Forced Transfer to Another LocationA significant change in the location where an employee is required to work may amount to constructive dismissal.
For example, you were hired to work in Toronto, but your employer suddenly requires you to relocate to another city without your agreement.
The impact of the relocation, the distance involved and any contractual mobility provisions will be relevant.
5.Workplace Harassment, Bullying and Abusive TreatmentConstructive dismissal may also arise when an employer engages in serious or persistent harassment, bullying, intimidation or abusive conduct that makes continued employment objectively intolerable.
Examples may include:
- Repeated humiliation in front of colleagues.
- Persistent verbal abuse by management.
- Unreasonable intimidation or threats.
- Deliberately creating an intolerable work environment.
- Sustained hostile treatment designed to force an employee to leave.
Not every unpleasant interaction, workplace disagreement or isolated incident amounts to constructive dismissal. The seriousness, frequency and overall circumstances are important.
6.Suspension Without Proper JustificationAn employer’s decision to suspend an employee indefinitely, particularly where the suspension is not authorized by the employment agreement, may amount to constructive dismissal.
In certain circumstances, even a paid suspension can constitute constructive dismissal.
7.An Ultimatum to Resign or Accept Unacceptable ConditionsAn employer may effectively force an employee out by presenting an ultimatum.
For example:
“You either accept the significant reduction in your salary or resign.”
If the circumstances meet the legal test, the employee’s resignation may constitute constructive dismissal rather than a voluntary resignation.
What Is the Legal Test for Constructive Dismissal?
The Supreme Court of Canada addressed the legal principles governing constructive dismissal in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10.
The Court recognized two principal ways in which constructive dismissal may occur.
First: A substantial unilateral change to an essential term of employment.
The employee must generally establish that:
- The employer made a unilateral change or breached an express or implied term of the employment agreement.
- The change substantially altered an essential term or condition of employment.
- The change was sufficiently serious to constitute constructive dismissal.
The assessment is objective. The question is whether a reasonable person in the employee’s circumstances would have understood that the employer was substantially changing an essential term of the employment agreement.
Second: A series of actions demonstrating that the employer no longer intends to be bound by the employment agreement.
Constructive dismissal does not always arise from one specific incident.
A series of actions, considered together, may demonstrate that the employer has fundamentally repudiated the employment relationship.
For example, an employer may repeatedly undermine an employee’s position, remove important responsibilities, exclude the employee from essential workplace activities and engage in persistent hostile treatment.
Although each incident may appear insufficient on its own, their cumulative effect may support a constructive dismissal claim.
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Can an Employer Change Your Employment Contract Without Your Consent?
Generally, an employer cannot unilaterally impose a substantial adverse change to an essential term of an employment agreement and assume that the employee must accept it.
However, employers may have certain contractual rights to make reasonable changes to working arrangements.
For example, an employment agreement may contain provisions allowing an employer to change work schedules, assign duties or transfer employees between locations.
The wording of the employment agreement is therefore important.
Even where an employer has a contractual right to make certain changes, that right is not necessarily unlimited. The nature, scope and manner of exercising the contractual authority must be considered.
Employees should not assume that every workplace change is unlawful, just as employers should not assume that every change is permissible.
What Compensation Can You Receive If You Have Been Constructively Dismissed?
If an employee successfully establishes constructive dismissal, the law generally treats the employment relationship as having been terminated by the employer.
Depending on the circumstances, the employee may be entitled to compensation that includes:
- Reasonable Notice or Pay in Lieu of Notice
Under common law, an employee may be entitled to reasonable notice of termination or damages in lieu of notice.
The amount depends on several factors, including:
- The employee’s age.
- Length of service.
- Nature and seniority of the position.
- Availability of comparable employment.
- The circumstances of the employment relationship.
The amount of common-law reasonable notice is not determined by a fixed formula.
2.Statutory Termination Pay
The Ontario Employment Standards Act, 2000 (ESA) provides minimum termination entitlements for eligible employees.
Depending on length of service and other statutory requirements, an employee may be entitled to up to eight weeks of termination pay.
3.Statutory Severance Pay
Some employees may also qualify for statutory severance pay under the ESA.
Generally, eligibility requires at least five years of employment and that the employer meet the applicable payroll or permanent-discontinuance requirements.
Eligible employees may receive one week’s severance pay for each completed year of service and a proportionate amount for a partial year, up to a maximum of 26 weeks.
4.Benefits and Other Compensation
Depending on the circumstances, an employee may also have claims relating to:
- Loss of employment benefits during the notice period.
- Unpaid wages and vacation pay.
- Unpaid commissions or bonuses.
- Other contractual compensation.
The employee’s employment agreement must be reviewed to determine whether it contains enforceable termination provisions that limit common-law notice entitlements.
What Should You Do If You Believe You Have Been Constructively Dismissed?
This is extremely important.
If your employer has substantially changed your employment conditions, you should not rush to resign.
A constructive dismissal claim can be complicated, and the steps you take after the employer makes the change can significantly affect your legal rights.
Consider the following:
- Do not immediately resign.
Resigning without obtaining legal advice may expose you to unnecessary legal and financial risks.
- Do not automatically accept the changes.
Continuing to work under new conditions without clearly objecting may, depending on the circumstances, be interpreted as acceptance of the changes.
- Document everything.
Keep copies of:
- Your original employment agreement.
- Emails and written communications from your employer.
- Salary and compensation records.
- Job descriptions.
- Performance reviews.
- Records of changes to your duties or working conditions.
- Communicate your objection in writing.
Where appropriate, clearly communicate that you do not agree to the proposed changes and reserve your legal rights.
- Obtain legal advice before resigning.
An employment lawyer can assess whether the employer’s conduct meets the legal test for constructive dismissal and advise you on the appropriate next steps.
Can You Sue Your Employer for Constructive Dismissal?
Yes. If the legal requirements are satisfied, an employee may commence a civil claim against their employer for constructive dismissal.
The employee may seek damages in lieu of reasonable notice, subject to the applicable employment agreement and the law.
However, constructive dismissal is not automatically established simply because an employee is unhappy with their employer or disagrees with a management decision.
The employee must establish the necessary legal elements on a balance of probabilities.
There may also be statutory remedies available through the Ontario Ministry of Labour, depending on the nature of the claim.
It is important to obtain legal advice about the appropriate forum and applicable limitation periods before proceeding.
Are You Being Forced Out of Your Job? Know Your Rights
You do not necessarily have to be formally fired to have a claim against your employer.
A substantial salary reduction, demotion, significant change in responsibilities, forced relocation, indefinite suspension or serious workplace mistreatment may, depending on the circumstances, amount to constructive dismissal.
However, the legal test is fact-specific. The employment agreement, the employer’s conduct and the employee’s response must all be carefully examined.
Before you resign or accept significant changes to your employment conditions, understand your legal rights.
Protecting Your Employment Rights
If your employer has significantly changed your working conditions, reduced your salary, demoted you or created an intolerable workplace environment, you may have legal options.
Frequently Asked Questions
We understand that the process can be confusing and you may have many questions.
Below are some common FAQs that can help guide you.
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