Constructive Dismissal – Know The Laws of Your Province

written by Tina Tsonis | October 7, 2024

Employer actions that can result in a constructive dismissal are when the employer breaches a written or unwritten term in the employee’s contract. If the breach is serious and the employee resigns their employment, the court may treat it as a dismissal instead of as a typical voluntary resignation. When a court treats a resignation this way, it allows the employee to pursue severance as if it were a wrongful dismissal.

Constructive Dismissal Process

Employer actions that can result in a constructive dismissal are when the employer breaches a written or unwritten term in the employee’s contract. If the breach is serious and the employee resigns their employment, the court may treat it as a dismissal instead of as a typical voluntary resignation. When a court treats a resignation this way, it allows the employee to pursue severance as if it were a wrongful dismissal.

Not every breach of an employment contract is sufficient to allow a resignation to be considered a constructive dismissal in Alberta. Generally, it either has to be one major breach of a term of employment, or otherwise shown through the employer’s actions that they do not intend to follow the employment contract.

Causes for Constructive Dismissal – Common Signs of Constructive Dismissal

  • Compensation (wages) cuts and other changes.
  • Demotions, or title or duty changes.
  • Taking away privileges.
  • Taking away reporting
  • Lay-offs.
  • Suspensions (and possibly other discipline).
  • Changes to working conditions, location, etc.
  • Changes to management structure.
  • Discrimination.
  • Harassment / Bullying.
  • Generally hostile or unsafe work environment.

Further details on the Employment Standards Code can be found at Canlii.org and Bowriveremploymentlaw.com.

Constructive Dismissals in British Columbia

A constructive dismissal is when an employee is compelled to resign due to a fundamental change in their job. Since unreasonable work conditions are the result of the employee leaving, their resignation is seen as a termination and they can file a wrongful dismissal claim.

Employees looking to make a claim for constructive dismissal must state they experienced one of the two following situations:

    • An intolerable workplace: When the employee experiences harassment, bullying, or another form of abuse from their employer that makes the work conditions unbearable.
    • A unilateral change of an essential term of employment: In this scenario, the employee experiences a significant and detrimental change to the terms of their employment, such as:
      • An unfavorable change in work location;
      • A pay cut (e.g., commissions, non-discretionary bonus, benefits, etc.);
      • A substantial change in job responsibilities;
      • An unjustified demotion;
      • A reduction in wage rate;
      • A change in geographic location;
      • Limiting of authority;
      • Demotion; and
      • A change in responsibilities imposed by the employer.

If an employer is found responsible for constructively dismissing an employee, they will have to provide the employee with a severance package.

Further details on the Guide to the Employment Standards Act and Regulations can be found at Gov.BC.ca and at Peninsulagrouplimited.com.

Constructive dismissal, also known as constructive discharge, is a legal concept in employment law that occurs when an employer makes working conditions so intolerable for an employee that the employee feels compelled to resign. In other words, although the employee technically voluntarily resigns, the resignation is considered involuntary in the eyes of the law because the employer has essentially forced the employee to leave by creating an untenable work environment.

Potential Consequences of Constructive Dismissal For Employers

  1. Legal Liability: If an employee successfully proves constructive dismissal, the employer may be liable to pay damages to compensate the employee for losses suffered as a result of the dismissal.
  2. Wrongful Dismissal Lawsuits: Employee may also pursue a wrongful dismissal lawsuit if they believe their termination breached the terms of their employment contract or violated employment standards legislation.
  3. Reputational Damage: Word of the constructive dismissal and any ensuing legal action could damage the employer’s reputation, both within the industry and among potential future employees.
  4. Employee Morale and Productivity: Creating a toxic or hostile work environment that leads to claims of constructive dismissal can have a negative impact on employee morale, productivity, and overall workplace culture.
  5. Legal Costs: Defending against constructive dismissal claims can involve significant legal costs, including the cost of hiring lawyers and potentially paying settlements.
  6. Regulatory Penalties: The employer may face penalties or fines from regulatory bodies or labour standards agencies for violations of employment laws or regulations.

Constructive Dismissal / Avoidance

Employers should implement a strategy when making changes to the terms of employment.

  • Get everything in writing.A written employment contract is critical.
  • Give Notice.If you plan to make changes, give notice and the opportunity to ask questions. Employees have the right to dispute changes.
  • Be transparent. Being straightforward and honest is the best approach. Employees will be much more receptive to the situation.
  • Take employee complaints seriously. Complaints about a toxic work environment, working conditions, harassment, etc. must be taken seriously.
  • When possible, offer additional compensation.If you do need to change contracts, offering new compensation will help greatly. Especially when the contract change is negative, having a monetary increase often offsets these concerns.

Further details on Constructive Dismissal in Manitoba can be found at Cfib-fcei.ca.

Constructive dismissal occurs in instances where an employer’s conduct shows an intention of no longer wishing to be bound by the employment contract. There are two distinct branches of constructive dismissal.

  1. The first branch occurs when an employer unilaterally changes or breaches an express or implied term of the employment agreement and such change or breach is sufficiently serious. Most often, the change or breach involves an employee’s compensation, work duties or place of work. It is important to note that not every change or breach by an employer will amount to constructive dismissal; the question is one of degree. For example, a change from earning $80,000 to $78,000 per year or the addition of a few minor work duties would probably not be sufficient to establish constructive dismissal. However, the deletion, without prior notice, of a bonus that accounts for 25 per cent of an employee’s overall annual compensation would most likely meet the threshold.
  2. The second branch of constructive dismissal does not require a specific substantial change to an employee’s contract, but consists of employer conduct, that when viewed in all the circumstances, would lead a reasonable person to conclude that the employer no longer intends to be bound by the employment contract. Put another way, the employer’s conduct and treatment of the employee must be such that it has made continued employment for the employee It should be noted that “intolerable” is not synonymous with “difficult”. The employee’s workplace must be so unendurable, whether it is due to coworker harassment, work overload, or some other component of the employee’s work, that a reasonable person would not expect the employee to continue with the employment relationship in its current state.
  3. Where either of the two constructive dismissal scenarios occur, the employee has two options: (1) accept the employer’s conduct or changes made, or (2) treat the employment relationship at an end and sue the employer for wrongful dismissal. Since the employee has not been formally dismissed by the employer, the act of the employee treating the contract at an end by resigning is referred to as constructive dismissal.
  4. While many employees may believe that they have a claim for constructive dismissal, an employee must be cautious before taking the plunge and resigning. First, in order to receive damages for wrongful dismissal, many employees commence formal civil actions against their former employer. Second, the burden rests with the employee to prove he or she was constructively dismissed and is thereby entitled to damages for wrongful dismissal. If deemed unsuccessful, the employee may receive no financial award and has resigned from employment for no legal reason.
  5. The employer will need to prove that the employee received a dismissal notice. Where the employer does not provide the reasons in writing, the dismissal becomes a termination and for an employee employed with an employer for 6 months or more, the employer will be required to pay the employee what he would have earned during the applicable notice period.

Further details on the Employment Standards Act can be found at Laws.gnb.ca.

Constructive dismissal can occur if an employee resigns in response to a change to their job. Specifically, this may occur when an employer significantly changes a fundamental employment term or condition without the employee’s actual or implied consent. Constructive dismissals can also result from a series of small changes that, when added together, affect an employee’s work and ultimately lead to resignation.

Employee Protection

Employers in Newfoundland and Labrador have specific obligations and requirements to manage and deal with constructive dismissal in the workplace. These obligations are primarily guided by the Employment Standards Act in Section 43.21 (1) to (4).

(1) An employer shall not dismiss an employee or give notice of dismissal to an employee because an employee intends to take, applies for or takes leave under this Part.

(2) Where an employee is dismissed by his or her employer contrary to subsection (1), the onus of proving that the reason for dismissal is unrelated to the leave rests with the employer.

(3) An employer shall reinstate an employee at the end of his or her leave under this Part on terms and conditions that are not less beneficial than those that existed before the leave began.

(4) Unless the employer and the employee otherwise agree, a period of leave under this Part does not count towards the application of the rights, benefits, and privileges conferred by this Act upon an employee, but the period worked upon resumption of employment after leave shall be considered, for the purpose of this Act, to be continuous with the period worked before the leave. Section 43.21 (1) to (4).

Further details on the Employment Standards Act can be found at Assembly.NL.

Employers in Nova Scotia have specific obligations and requirements to manage and deal with constructive dismissal in the workplace. These obligations are primarily guided by the Labour Standards Code in Section 71(1) to (3), 72(1) to (4) and 73(1).

Dismissal or suspension without just cause

71 (1) Where the period of employment of an employee with an employer is ten years or more, the employer shall not discharge or suspend that employee without just cause unless that employee is a person within the meaning of person as used in clause (d), (e), (f), (g), (h) or (i) of subsection (3) of Section 72.

(2) An employee who is discharged or suspended without just cause may make a complaint to the Director in accordance with Section 21.

(3) An employee who has made a complaint under subsection (2) and who is not satisfied with the result may make a complaint to the Board in accordance with Section 23 and such complaint shall be deemed to be a complaint within the meaning of subsection (1) of Section 23. R.S., c. 246, s. 71; 2010, c. 37, s. 106.

Termination of employment by employer

72 (1) Subject to subsection (3) and Section 71, an employer shall not discharge, suspend, or lay off an employee, unless the employee has been guilty of willful misconduct or disobedience or neglect of duty that has not been condoned by the employer, without having given at least:

(a) one week’s notice in writing to the person if his period of employment is less than two years;

(b) two weeks’ notice in writing to the person if his period of employment is two years or more but less than five years;

(c) four weeks’ notice in writing to the person if his period of employment is five years or more but less than ten years; and

(d) eight weeks’ notice in writing to the person if his period of employment is ten years or more.

(2) Subject to subsection (3), and notwithstanding subsection (1), where an employer discharges or lays off ten or more persons in an establishment within any period of four weeks or less, the employer shall give notice of not less than:

(a) eight weeks if the employment of ten or more persons and fewer than one hundred persons is to be terminated;

(b) twelve weeks if the employment of one hundred or more persons and fewer than three hundred is to be terminated;

(c) sixteen weeks if the employment of three hundred or more persons is to be terminated.

(3) Subsections (1) and (2) do not apply to:

(a) a person whose period of employment is less than three months;

(b) a person employed for a definite term or task for a period not exceeding twelve months;

(c) a person who is laid off or suspended for a period not exceeding six consecutive days;

(d) a person who is discharged or laid off for any reason beyond the control of the employer including complete or partial destruction of plant, destruction or breakdown of machinery or equipment, unavailability of supplies and materials, cancellation, suspension, or inability to obtain orders for the products of the employer, fire, explosion, accident, labour disputes, weather conditions, and actions of any governmental authority, if the employer has exercised due diligence to foresee and avoid the cause of discharge or lay-off;

(e) a person who has been offered reasonable other employment by his employer;

(f) a person who, having reached the age of retirement established by the employer on the basis of a bona fide occupational requirement for the position in which that person is employed, has his employment terminated;

(g) a person who is laid off in circumstances established by regulation as an exception to subsection (1) or (2);

(h) a person employed in the construction industry;

(i) a person employed in an activity, business, work, trade, occupational profession, or any part thereof, that is exempted by regulation.

(4) Notwithstanding subsections (1), (2) and (3), but subject to Section 71, the employment of a person may be terminated forthwith where the employer gives to the person notice in writing to that effect and pays him an amount equal to all pay to which he would have been entitled for work that would have been

For more information, see:

  • Termination Of Employment by Employee Section 73 (1).

Further details on the Labour Standards Code can be found at Nslegislature.ca.

Employers in Northwest Territories and Nunavut have specific obligations to manage and deal with constructive dismissal in the workplace.

Definitions

Constructive termination

Where an employer has substantially altered a condition of employment and the Labour Standards Officer is satisfied that the purpose of the alteration is to discourage the employee from continuing in the employment of the employer, the Labour Standards Officer may declare that the employer has terminated the employment of the employee. Section 14.08.

The Employment Standards Officer may declare that an employer has terminated the employment of an employee, if the Employment Standards Officer is satisfied that (a) the employer has substantially altered a condition of the employee’s employment; and (b) the purpose of the alteration is to discourage the employee from continuing in the employment of the employer. Section 40.

Employer Prohibitions

An employer shall not dismiss, suspend, lay off, demote, or discipline an employee due to the employee taking or intending to take a leave of absence in accordance with this Part, or take into consideration the employee taking or intending to take a leave of absence in accordance with this Part in any decision to promote or train an employee.  Section 39.7.

Further details on the Labour Standards Act and Employment Standards Act can be found at canlii.org and gov.nt.ca.

 

Employee Notice

An employee to whom notice has been given under this section shall not terminate his or her employment without first giving the employer written notice.

What is Constructive Dismissal?

Constructive dismissal is a legal concept that allows the court to decide if an employee has been terminated, even in circumstances where the employee has appeared to have quit. Usually, the employer has failed to comply with the employment contract or switched a term in the contract without the employee’s knowledge in a significant respect, thus forcing the employee to quit. For example, if the employer makes changes to the employee’s terms and conditions of employment that result in a significant reduction in salary or a significant adverse change in such things as the employee’s work location, hours of work, authority, or position, that employee may be forced to quit. Constructive dismissal may also include situations where an employer harasses or abuses an employee. If an employer gives an employee an ultimatum to “quit or be fired,” and the employee resigns in response, this can be considered constructive dismissal. However, if a change in the contract becomes effective after reasonable notice of the change, then there is no constructive dismissal.

Signs of Constructive Dismissal

  • Evidence of reduction or elimination of salary, bonuses, commission, benefits, and entitlement.
  • Temporary layoff.
  • Scheduling or shift changes that impact hardship such as childcare, religious belief, and/or obligations affecting your personal life or work balance that seem unfair or unreasonable.
  • Transfer to another department
  • Demoted and responsibilities reduce.
  • Working in an unstable environment and hostile environment.

Categories of Constructive Dismissal

  1. A new term introduced by the employer without notice and the consent of the employee.
  2. The change will impact the employee’s job term.
  3. If the employee refuses the terms of the employment contract.

Further details on Constructive Dismissal Ontario can be found at Monkhouselaw.com and Tailorlaw.com.

Constructive Dismissal – Definition

Where an employer unilaterally reduces an employee’s pay or benefits or reassigns work duties to such an extent that the essential nature of the employee’s position is altered, the employee may potentially consider their employment contract to have been repudiated and claim against their employer for constructive dismissal and monetary damages. It is important to note that the change need not reference specific terms of an employment agreement or job description. Rather, an alteration to an internal policy or procedure that has a significant impact on an employee’s terms and conditions of employment may be enough to trigger constructive dismissal.

Minor changes to an employee’s job duties will likely not trigger a constructive dismissal, such as the requirement to wear personal protective equipment. Employers have the right to make reasonable changes to an employee’s job duties and responsibilities in order to properly manage their business and adapt to changing market conditions.

Employer Best Practices

  • Where changes are significant, provide employees advanced notice of when these changes will take place.
  • If notice cannot be provided, consider providing the employee something of value in exchange for the changes, such as additional vacation time, stock options, or a paid bonus upon returning to normal operations.
  • Reduce the organizational changes to writing and have the affected employees sign off that they have read, understood and agree to the changes.
  • Where there are several significant changes to an employee’s position, consider offering the employee new employment under a new employment contract.

Employers Duty to Mitigate

An employee who has been constructively dismissed is obligated to mitigate their losses by finding alternative comparable work. Often, employees have not been required to mitigate such losses by continuing to work with the employer; however, in some circumstances, an employee may have an obligation to mitigate their losses by continuing employment with the employer. This is most likely to occur where the salary offered is similar, the working conditions are the same (or not substantially different), and where the personal relationships are not acrimonious.

Further details on the Constructive Dismissal can be found at Mltaikins.com.

Employers in Quebec have specific obligations and requirements to handle and deal with issues relating to dismissals and layoffs in the workplace pursuant to the Employment Standards Act.

Dismissals and Layoffs

If the employer makes dismissals or layoffs that would have included the employee had the employee remained at work, the employee retains the same rights with respect to a return to work as the employees who were dismissed or laid off. Section 79.5.

This division shall not grant to an employee any benefit to which the employee would not have been entitled if the employee had remained at work. Section 79.6.

Employee Dismissal and Layoff Complaint Procedure

An employee credited with two years of uninterrupted service in the same enterprise who believes they have not been dismissed for a good and sufficient cause may present a complaint in writing to the Commission des normes, de l’équité, de la santé et de la sécurité du travail, or mail it to the address of the Commission des normes, de l’équité, de la santé et de la sécurité du travail within 45 days of the dismissal, except where a remedial procedure, other than a recourse in damages, is provided elsewhere in this Act, in another Act or in an agreement. Section 124.

If the complaint is filed with the Administrative Labour Tribunal within this period, failure to have presented it to the Commission des normes, de l’équité, de la santé et de la sécurité du travail cannot be set up against the complainant.

Where the Administrative Labour Tribunal considers that the employee has been dismissed without good and sufficient cause, the Tribunal may:

(1) order the employer to reinstate the employee;

(2) order the employer to pay to the employee an indemnity up to a maximum equivalent to the wage the employee would normally have earned had the employee not been dismissed;

(3) render any other decision the Tribunal believes fair and reasonable, taking into account all the circumstances of the matter. Section 128.

Administrative Labour Tribunal Specific Obligation

In the case of a domestic worker or a person whose exclusive duty is to take care of or provide care to a child or to a sick, handicapped or aged person, the Administrative Labour Tribunal may only order the payment to the employee of an indemnity corresponding to the wage and other benefits of which the employee was deprived due to dismissal.

Further details on the Employment Standards Act can be found at Canlii.org.

The phrase “constructive dismissal” describes situations where the employer has not directly fired the employee. Rather, the employer has:

  • Failed to comply with the contract of employment in a major respect;
  • Unilaterally changed the terms of employment; or
  • Expressed a settled intention to do thus forcing the employee to quit.

Constructive dismissal is sometimes called “disguised dismissal” or “quitting with cause”. This is because it often occurs in situations where the employer offers the employee the alternative of:

  • Leaving, or
  • Submitting to a unilateral and substantial alteration of a fundamental term or condition of their employment.

It is the employer’s failure to meet its contractual obligations that distinguishes a constructive dismissal from an ordinary resignation.

The employer’s action must be unilateral, which means the employer must do it without the consent of the employee. If it is not unilateral, the variation is not a constructive dismissal but merely an agreed change to the contract of employment.

If the employee clearly indicates non-acceptance of the new conditions of employment to the employer, there has been a constructive dismissal. However, this is only if the employee leaves within a reasonable period (usually short). By not resigning, the employee indicates he or she accepts the new conditions of employment.

Courts have held that there has been a constructive dismissal even though the complainant remains in the employ of the employer. This includes, for example, cases where the employee:

  • Continues to work under the new conditions in order to mitigate damages, and
  • Either protests the new conditions explicitly or makes it clear that he still reserves the right to take legal action.

The employee cannot be said to have condoned or accepted the change in working conditions if the employee:

  • Formally commences legal proceedings in respect of the change while remaining in the employment of the employer, or
  • Does not formally initiate proceedings but simply attempts to negotiate the matter while remaining at work.

Further details on Individual Layoff or Termination can be found at https://www.saskatchewan.ca and https://www.canada.ca.

Employers in the Territory of Yukon have specific obligations and responsibilities to manage and deal with dismissals or discipline of employees during the course of employee work operations.

Prohibitions relating to employers

No employer or person acting on behalf of an employer shall:

(a) Refuse to employ or to continue to employ or suspend, transfer, lay off, or otherwise discriminate against any person with respect to employment, pay, or any other term or condition of employment or intimidate, threaten, or otherwise discipline any person, because the person:

(i) Is or proposes to become, or seeks to induce any other person to become, a member, officer, or representative of a trade union or participates in the promotion, formation, or administration of a trade union;

(ii) Has been expelled or suspended from membership in a trade union for a reason other than a failure to pay the periodic dues, assessments, and initiation fees uniformly required to be paid by all members of the trade union as a condition of acquiring or retaining membership in the trade union;

(iii) Has testified or otherwise participated or may testify or otherwise participate in a proceeding under this Part;

(iv) Has made or is about to make a disclosure that the person may be required to make in a proceeding under this Part;

(v) Has made an application or filed a complaint under this Part; or

(vi) Has participated in a strike that is not prohibited by this Part or exercised any right under this Part.

(b) Impose any condition in a contract of employment that restrains, or has the effect of restraining, an employee from exercising any right conferred on them by this Part;

(c) Suspend, discharge or impose any financial or other penalty on an employee, or take any other disciplinary action against an employee, by reason of their refusal to perform all or some of the duties and responsibilities of another employee who is participating in a strike or subject to a lockout that is not prohibited by this Part;

(d) Deny to any employee any pension rights or benefits to which the employee would be entitled but for:

(i) The cessation of work by the employee as the result of a lockout or strike that is not prohibited by this Part; or

(ii) The dismissal of the employee contrary to this Part:

(d.1) Where the requirements of paragraphs 89(1)(a) to (d) have been met, cancel, or threaten to cancel a medical, dental, disability, life, or other insurance plan, whether administered by the employer or otherwise, that benefits employees, so long as the bargaining agent tenders or attempts to tender to the employer payments or premiums sufficient to continue the plan;

(d.2) Where the requirements of paragraphs 89(1)(a) to (d) have been met and the bargaining agent has tendered or attempted to tender to the employer payments or premiums sufficient to continue an insurance plan referred to in paragraph (d.1), deny or threaten to deny to any employee any benefits under the plan to which the employee was entitled before those requirements were met.

(e) Seek, by intimidation, threat of dismissal or any other kind of threat, by the imposition of a financial or other penalty or by any other means, to compel a person to refrain from becoming or to cease to be a member, officer or representative of a trade union or to refrain from:

(i) Testifying or otherwise participating in a proceeding under this Part;

(ii) Making a disclosure that the person may be required to make in a proceeding under this Part; or

(iii) Making an application or filing a complaint under this Part;

(f) Suspend, discharge, or impose any financial or other penalty on a person employed by them, or take any other disciplinary action against such a person, by reason of that person having refused to perform an act that is prohibited by this Part; or

(g) Bargain collectively for the purpose of entering into a collective agreement or enter into a collective agreement with a trade union in respect of a bargaining unit, if another trade union is the bargaining agent for that bargaining unit. Section 94(3).

For more information, see:

  • Employee Status Preserved Section 3(2).
  • Arbitration Section 36.1(2).
  • Division XIV Unjust Dismissal.

Further details on the Canada Labour Code can be found at Laws.justice.gc.ca.