Constructive dismissal is where an employer makes a unilateral change to the employer-employee relationship outside the scope of the original employment contract. Changing a fundamental aspect of the agreement without consent may be considered termination. If an employee is constructively dismissed, they are entitled to pay in place of reasonable notice and potentially also severance pay, even if the employee has resigned voluntarily.

This article looks at some different forms of constructive dismissal and a recent case of the Superior Court of Justice of Ontario in which an employee claimed that he was constructively dismissed. The Court found that he had not proved that he was constructively dismissed and therefore that he was not entitled to damages. 

Forms of constructive dismissal

The burden rests on the employee to establish that they have been constructively dismissed. It is the employer’s perceived intention no longer to be bound by the employment contract that gives rise to constructive dismissal. A plaintiff can follow two routes to establish constructive dismissal.

Single unilateral act breaches an essential term of the contract

The first option for the employee is to demonstrate that the employer has, by a single unilateral act, breached an essential term of the employment contract. 

There are two steps involved in this – firstly, the employer’s conduct must be found to breach the contract, and secondly, the conduct must substantially alter an essential term of the contract. Step one is an objective test (the conduct either did or did not breach the contract), whereas step two depends on the perspective of a reasonable person in the same circumstances as the employee (a reasonable person in the employee’s situation either would or would not find that the conduct substantially altered an essential term of the contract). 

This form of constructive dismissal might be found where there has been a significant change to the employee’s role, working environment or salary. This might include a demotion, relocation to a new city, changing shifts from day to night, or a significant reduction in compensation such as bonus entitlements or commission. 

Cumulative effect of a series of acts shows that the employer no longer intends to be bound by the contract

The second option is for the employee to show that a series of acts, taken together, show that the employee no longer intends to be bound by the employment contract. This is also determined from the perspective of a reasonable person in the same circumstances as the employee.

This form of constructive dismissal might be found where a workplace has become toxic or poisoned for one or more employees, such as if they are subject to harassment or discrimination. 

An employee claims constructive dismissal following an alleged demotion and title change by the employer

In Tonkin v Paris Kitchens, a 69-year-old employee resigned following an alleged “humiliating and demeaning” change in job title from Regional Sales Manager to Project Manager. He was to receive the same salary. The employer designed and manufactured custom kitchen cabinetry. It claimed that the employee was only ever a Senior Project Manager and that he was not demoted, and that the employee was upset after the employer posted a job advertisement for a Business Development Representative.

Justice Gibson accepted the employer’s evidence that the employee did not exercise any significant sales or business development function. Despite the fact that the employer sent the employee an email with a Regional Sales Manager job description, he was solely employed as a Project Manager and was never performance managed in connection with failing to meet the job description in the email. 

The employer did not evince an intention not to be bound by the contract, so the employee’s resignation was voluntary

His Honour first examined whether the employer engaged in a single unilateral act that breached an essential term of the employment contract. His Honour noted that the employee did not act in any meaningful fashion as a Sales Manager and instead was employed as a Project Manager. As such, the formal change in the title led to no significant change in responsibilities and duties. The employee was frustrated after being overlooked for a role in business development. Justice Gibson, therefore, decided that the employer did not breach an essential term of the employment contract. 

Turning to whether there were a series of acts demonstrating that the employer no longer intended to be bound by the employment contract, his Honour decided that there were no changes in reality in respect of the employee. His salary and benefits were to have been the same and he was asked to continue doing the same work that he had been doing for many years. There was no significant change in responsibility. A reasonable person in the position of the employee would not have concluded otherwise.

Justice Gibson concluded that the employee did not satisfy the onus on him to demonstrate that he was constructively dismissed. Therefore, he voluntarily left employment and was not entitled to damages. 

Contact Haynes Law Firm in Toronto for Guidance on Constructive Dismissal 

It is important to speak with a knowledgeable employment lawyer to assess a potential constructive dismissal claim before resigning, to ensure you are well-positioned to bring a successful claim. Contact us as soon as possible to preserve your claim – if you fail to resign within a reasonable time, a court may view your inaction as passive acceptance of the circumstances.

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We help employees seek appropriate remedies for constructive dismissal. Paulette Haynes has in-depth experience litigating constructive dismissal claims, which makes her an extremely effective advocate on behalf of her employee clients. Paulette also works with employers to proactively address potential areas of concern before they become a problem. Avoid unintentionally triggering costly constructive dismissal claims with our trusted guidance. Please contact us online or call us at 416.593.2731.