What does Constructive Dismissal mean in Ontario?

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A constructive dismissal may occur when an employer makes a significant change to a fundamental term or condition of an employee's employment without the employee's actual or implied consent.


For example, an employee may be constructively dismissed 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 negative change in such things as the employee's work location, hours of work, authority, or position. Constructive dismissal may also include situations where an employer harasses or abuses an employee, or an employer gives an employee an ultimatum to "quit or be fired" and the employee resigns in response.


The employee would have to resign in response to the change within a reasonable period of time in order for the employer's actions to be considered a termination of employment for purposes of the ESA.


Constructive dismissal is a complex and difficult subject. For more information on constructive dismissal please contact us for a free consultation with one of our employment lawyers.


The Supreme Court of Canada stated in Potter v. New Brunswick Legal Aid Services Commission that there are two branches or tests that will determine when a constructive dismissal has occurred:


when the employer’s single unilateral act (such a demoting the employee) breached the employment contract in a manner that substantially altered the essential terms of the contract; or


when the employer’s ongoing conduct demonstrates an intention to no longer be bound by the employment contract, from the perspective of the reasonable person.


The Court will typically consider the nature and extent of the unilateral change and the intention of the parties at the time the employment contract was agreed upon when deciding whether a constructive dismissal has actually occurred.


In Wronko v. Western Inventory Service Ltd. the Ontario Court of Appeal stated that an employee has three options when responding to his or her employer’s unilateral change to the terms of employment:


to accept the change, however significant. Acceptance can be either implicit or explicit. The employee may be found to have implicitly accepted or acquiesced to the change if the employee takes no action to dispute the change and continues in his or her role for a period of time (the length of time an employee may continue to work under the changed terms before he or she will be considered to have “accepted” the change is often a matter of dispute between the former employee and the employer);


to reject the change, quit his or her employment and claim that he or she has been constructively dismissed; or


in certain circumstances (such as a reduction in compensation), the employee may also have the option of remaining employed but notifying the employer that he or she has rejected the change to the employment contract. If the employer does not respond to the employee’s rejection the employer will be found to have acquiesced (i.e. implicitly accepted) to the employee’s position.


An employee who has been constructively dismissed may be required to remain with his or her employer in order to mitigate his or her damages. This is sometimes referred to as accepting “re-employment” (the obligation to accept re-employment is discussed in detail in the mitigation chapter). This requirement places a significant hurdle in front of any employee considering claiming a constructive dismissal because even if the employee is able to prove that he or she was constructively dismissed, the court may still take the position that the employee should have remained working for the employer in order to mitigate his or her damages. The court will review the specific facts and apply an objective standard to determine whether a reasonable person would accept re-employment. Although a number of factors will be considered by a court, often the key factor is whether or not it would be humiliating for the employee to remain with his or her former employer and/or whether the employee would have to work in an acrimonious environment if he or she continued at the employer. In situations where the constructive dismissal was triggered by a legitimate corporate restructuring or financial pressure on the company, and the employee has not been singled out for differential treatment, the dismissed employee is more likely to be required to accept re-employment with the employer to mitigate her damages.


Temporary Layoff
An employee is on temporary layoff when an employer cuts back or stops the employee’s work without ending his or her employment (e.g., laying someone off at times when there is not enough work to do). The mere fact that the employer does not specify a recall date when laying the employee off does not necessarily mean that the lay-off is not temporary. Note, however, that a lay-off, even if intended to be temporary, may result in constructive dismissal if it is not allowed by the employment contract.


For the purposes of the termination provisions of the ESA, a "week of layoff" is a week in which the employee earned less than half of what he or she would ordinarily earn (or earns on average) in a week.


A week of layoff does not include any week in which the employee did not work for one or more days because the employee was not able or available to work, was subject to disciplinary suspension, or was not provided with work because of a strike or lockout at his or her place of employment or elsewhere.


Employers are not required under the ESA to provide employees with a written notice of a temporary layoff, nor do they have to provide a reason for the lay-off. (They may, however, be required to do these things under a collective agreement or an employment contract.)


Under the ESA, a “temporary layoff” can last:

 

A.    not more than 13 weeks of layoff in any period of 20 consecutive weeks; 


or


B. more than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 consecutive weeks, where:


the employee continues to receive substantial payments from the employer;
or
the employer continues to make payments for the benefit of the employee under a legitimate group or employee insurance plan (such as a medical or drug insurance plan) or a legitimate retirement or pension plan;
or
the employee receives supplementary unemployment benefits;
or
the employee would be entitled to receive supplementary unemployment benefits but isn't receiving them because he or she is employed elsewhere;
or
the employer recalls the employee to work within the time frame approved by the Director of Employment Standards; 
or
the employer recalls the employee within the time frame set out in an agreement with an employee who is not represented by a trade union;
or


C. a layoff longer than a layoff described in 'B' where the employer recalls an employee who is represented by a trade union within the time set out in an agreement between the union and the employer.


If an employee is laid off for a period longer than a temporary layoff as set out above, the employer is considered to have terminated the employee's employment. Generally, the employee will then be entitled to termination pay.