A Primer on Constructive Dismissal: Don’t Wait Until It’s Too Late

Constructive dismissal occurs when an employee quits their job in response to an employer’s fundamental breach of an employment agreement. In doing so, the employee treats the employment contract at an end. After quitting, the employee may then sue the employer for wrongful dismissal damages as if they were wrongfully dismissed. 

The court will need to determine whether in fact, the circumstances warrant a finding of constructive dismissal. Typically, this will require the employer’s breach to be a fundamental breach going to the root of the employment contract. 

Some of the common reasons why employees might resort to pursuing constructive dismissal actions after quitting for cause may be due to changes in job duties, work transfers to a new region, unfair treatment in the workplace or changes to compensation. 

In determining whether such a breach justifies a finding of constructive dismissal, the court must strike a balance between protecting the employee’s rights on the one hand, and recognizing the employer’s need for flexibility in managing its business affairs on the other. In a competitive business marketplace, to respond to intense business pressures, employers may need some flexibility to modify work schedules or job duties of employees, to change compensation structures, or to move employees. But courts will balance this against the rights of employees to expect the fundamental nature of their job to remain intact as bargained for while upholding their need for financial security. 

As such, over the course of an employment relationship, circumstances may arise which may cause an employee to quit their job due to changes created or fostered by the employer, which may or may not constitute constructive dismissal. Some of these situations are discussed below. 

Changes in Compensation:

If an employer unilaterally makes modifications to an employee’s compensation resulting in a loss of the employer’s wages, this can be ground for constructive dismissal. That being said, courts may also take the view that in certain circumstances, if the financial loss to the employee is only minor then constructive dismissal may not be found on the basis that the breach is not fundamental enough. 

For example, in the Ontario Court Decision of Black v. Second Cup Ltd (1995), the Plaintiff’s salary was reduced to $85,000 from $95,000 and the court held that this was not ground for a finding of constructive dismissal. 

Likewise, changes to an extended health benefits package available over the course of employment may not constitute constructive dismissal. However, every case needs to be assessed on its own facts. 

Changes to Duties/Responsibilities/Work Locations: 

Generally speaking, if an employee’s job is suddenly demoted resulting in a significantly reduced status, this may constitute constructive dismissal. There doesn’t necessarily need to be a correlating reduction in pay, status or responsibility. Rather, substantially changing the job duties and detracting from the employee’s derived pleasure from their previous work could constitute constructive dismissal. 

Take the example of an employee we’ll call John. John is hired for the purposes of leading and managing a sales team. Let’s assume John’s duties involve overseeing global sales and closing deals. After a year on the job, let’s assume John is subsequently transferred to a new administrative role (even with the same pay). The role involves infrequent sales opportunities and little management if any. 

In the above example, John may well have grounds for pursuing constructive dismissal. 

As a further example, someone unilaterally transferred from a secretarial role which they enjoyed for several years into a sales role could constitute constructive dismissal. Even unilaterally promoting an employee to a higher-level role with more responsibility, pay and status can constitute constructive dismissal if this is outside of the employee’s fundamental job duties as originally agreed to. 

Often times, employers will make modifications to an employee’s job duties with the fair and honest intention of enhancing efficiency within the organization. This may not absolve them of claims for constructive dismissal, but in close cases, this may persuade a court that such changes are justifiable to avoid a finding of constructive dismissal. On the other hand, changes to an employee’s job duties in a cloaked attempt to have them quit would likely be frowned upon by a court and be found to constitute constructive dismissal. 

One way that employers may be able to minimize liability from constructive dismissal claims in relation to such job changes would be to ensure that the employment contract explicitly contains terms permitting changes to the job duties or work assignment as required by the employer. 

That being said, the courts will still impose a sense of reasonableness when determining the circumstances of each case. This may be guided by industry standards and generally followed the customs and practices of the employer. 

Another example often litigated in constructive dismissal cases involves transfers or job relocation to other areas. This issue touches on the tension between employers’ rights to have the flexibility necessary to run their business and employees’ rights to work within a reasonable commuting distance absent some express provision to the contrary in the contract of employment. 

Although the facts must be assessed on a case-by-case basis, the courts will generally take a reasonableness approach when implying an employer’s right to transfer employees. In other words, undue hardships on the part of an employee to relocate (such as medical treatments for themselves or family members only available in their current location) may be seen as unreasonable action on the part of an employer. 

Unfair Treatment:

There may be circumstances in which an employee is treated so unfairly that he/she may consider the employment to be at an end. This may be the case with bad faith and procedural unfairness on the part of the employer or personal bullying and harassment in the workplace. 

Some examples in which the court could find constructive dismissal may involve situations such as the failure of an employer to take steps to prevent or safeguard an employee from harassment and bullying in the workplace, scheduling the employee for work without taking into account his/her family care duties or setting unrealistic performance goals well beyond the employee’s ability to attain. 

Accepting the changes:

It is very important for employees to understand that when fundamental changes are made to their jobs, doing nothing and continuing to “tolerate” the situation may result in a court finding that there was acceptance of these changes. This would preclude an employee from advancing a claim for constructive dismissal. 

It is important for the employee to make known to the employer any concerns about changes to the job. This should be done in writing. This would be important to counter a future argument by the employer that the employee has “consented” to the changed terms of the job. 

The longer the period of time that passes under which the employee continues to tolerate the changes without protest, the greater the chances that a court may find that such changes were accepted. 

As an employee, it is important to take steps as soon as possible to address fundamental changes. 


It will be interesting to see how the judicial and legislative landscape continues to play out over time as the courts try to strike a fair balance between employers’ demands for more flexibility to compete in a very competitive international environment, and employees’ needs for certainty and consistency in the nature of their job duties.

In summary, insurance companies may continue to undermine chronic pain injuries simply because it can be difficult to prove for many claimants. Yet chronic pain injuries may fall outside the Minor Injury Guideline and typically, in conjunction with medical evidence, the tribunal will look at how a person’s life has changed following the accident and the injuries sustained to assist in determining the claimant’s credibility and whether there is evidence supporting a diagnosis of chronic pain.

Written by Lawson Hennick / Personal Injury / July 28, 2019
Thanks to the Ontario Trial Lawyers Association (OTLA) for this article https://www.otla.com/

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