By: Stephanie McDonald and Baljinder (Bal) Singh Tiwana
Constructive dismissal occurs when an employer unilaterally changes a fundamental term or condition of employment, without the employee’s express or implied consent. Although the employee technically resigns, the law may treat the resignation as a termination by the employer, if constructive dismissal is established.
When an employee establishes that they have been constructively dismissed, they are entitled to reasonable notice.
The legal test is whether a reasonable person would view the employer’s conduct as a fundamental change to the employment contract. Please see the two-stage legal test below for further clarification.
In Ontario, constructive dismissal is a serious legal issue that may give rise to entitlements such as notice, severance, and damages—making early legal advice critical.
Common Situations That May Give Rise to Constructive Dismissal Claim
Constructive dismissal may arise in many situations, including (this list is not exhaustive):
- Reduction in salary
- Reduction in commissions
- Reduction or elimination of bonuses
- Lay-off
- Significant change in work location
- Demotion
- Change in duties
- Micromanagement
- Harassment and sexual harassment
- Bullying
- Discrimination
- Excessive micromanagement
Not every workplace change will amount to constructive dismissal. The change must be serious and a fundamental change to the employment relationship, that shows on balance, that the employer no longer wants to be bound by the employment contract.
The Legal Test for Constructive Dismissal
In Ontario, the courts apply the two-stage legal test set out by the Supreme Court of Canada in Potter v. New Brunswick Legal Aid Services Commission.
Stage One: Breach of the Employment Contract
The first question is whether the employer made a unilateral change to a fundamental term or condition of the employment contract, without the employee’s express or implied consent.
If the change breaches the employment contract, the analysis moves to stage two.
Stage Two: Substantial Alteration of Essential Terms
The second question asks whether the breach substantially altered an essential term of the employment relationship.
The court considers whether, at the time of the change, a reasonable person in the employee’s position, would have concluded that the employer no longer intended to be bound by the employment contract.
If the answer is yes, the court may find that constructive dismissal is established.
Timing Matters: Protecting Your Rights
Employees must act promptly. Delaying too long may be interpreted as accepting the change, which can forfeit the right to claim constructive dismissal.
The employee must decide whether to accept the new terms or to treat the unilateral change as constructive dismissal. This is time sensitive. Courts expect employees to raise objections within a reasonable period of time.
To protect yourself:
- Seek advice from an Ontario employment lawyer as soon as possible
- Do not assume you can “wait and see” without risk
- Gather and preserve evidence, including emails, job descriptions, pay records, and notes of workplace incidents
- Avoid voluntary resignation until you receive legal advice, if possible
Conclusion
Constructive dismissal is a powerful legal remedy, but it is also highly fact-specific and time-sensitive. Not every workplace change qualifies, and waiting too long can jeopardise or weaken your claim.
If your employer has unilaterally imposed a significant change to your job, compensation, or working conditions, early legal advice is critical. Acting quickly, documenting thoroughly, and understanding your rights can make the difference between a successful claim and a lost opportunity.
Workplace Sage Legal helps employees across Ontario understand their rights when faced with constructive dismissal. We provide clear, practical advice at an early stage—before missteps can damage your claim. Our team assesses whether a workplace unilateral change is likely to meet the legal test for constructive dismissal, including explaining your legal options in plain language.
We have helped clients develop strategies tailored to the client’s goals. From gathering evidence to negotiating severance or pursuing litigation, when necessary. Workplace Sage Legal advocates for you at every step, ensuring your rights are protected as best possible.
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Learn more about employment law through the articles below:
- The Risks of Quitting Your Job Without Legal Advice in Ontario
- The Job I Didn’t Sign Up For: Constructive Dismissal and Changing Roles
- Who is entitled to Reasonable Notice, and how is it calculated?
DISCLAIMER: This article/blog is provided for educational/informational purposes only. This blog does not constitute legal advice. Do not rely on any advice before speaking with a lawyer. This blog does not form a solicitor-client relationship.
