Ana Kraljevic Law Firm


Two Ways you can be Constructively Dismissed

Constructive dismissal claims are unlike straightforward wrongful dismissals.  In these types of cases, you will not hear the familiar phrase “you’re fired/terminated!” or “we’re letting you go.” The employer will not hand the employee a termination letter or say anything which communicates that the employment relationship is terminated.  Rather, the facts must objectively speak to the employer’s intention to unilaterally make a fundamental (and unfavourable) change to the employment agreement without providing reasonable notice of the change.  The word “constructive” means that the dismissal is a legal construct that must be proven based on the specific facts of the case.  The definition of constructive dismissal is not found anywhere in employment standards legislation.  Rather its key principles have been developed over time through the common law (“judge-made law”).  

There are many types of changes to the employment relationship that can constitute constructive dismissal.

The following are changes which commonly result in a constructive dismissal claim:

  1. Changes to the compensation package;
  2. Changes in job duties;
  3. Changes in geographic locations;
  4. Changes to hours and scheduling;
  5. Layoffs;
  6. Poisoned work environment.

Irrespective of the specific change, the law is clear that it must be one that is adverse to the employee.  

One of the leading cases on the law of constructive dismissal is the Supreme Court of Canada decision Farber v. Royal Trust Co., 1997 CanLII 387 (SCC), [1997] 1 SCR 846.  The court defined it as follows:

A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee.  Such action amounts to a repudiation of the contract of employment by the employer whether or not he intended to continue the employment relationship.  Therefore, the employee can treat the contract as wrongfully terminated and resign which, in turn, gives rise to an obligation on the employer’s part to provide damages in lieu of reasonable notice (Farber at para. 34). 

Farber makes it clear that the burden rests on the employee to establish, or “construct,” that they have been constructively dismissed. If the employee is successful, they are  entitled to damages in lieu of reasonable notice of termination.

The test for constructive dismissal was further refined in another Supreme Court of Canada decision – Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (CanLII), [2015] 1 SCR 500.  Wagner J., writing for the Supreme Court carved out two distinct ways, or branches, in which an employee can establish a claim for constructive dismissal claim.  The first branch applies where the employer has committed a single, discrete breach of the contract.  The second branch occurs when the employer does not commit a single, discrete breach, but evinces an intention to no longer be bound by the contract from a series of acts, taken collectively.

Therefore, if there is one single act, or fundamental breach, then it is the first branch that applies and the employee must fulfill two criteria to prove a constructive dismissal claim.

Applying the test to your own personal circumstances will require asking yourself the following questions:

First Branch of Test – Fundamental Changes to the Employment Agreement  

Part 1: Did my employer breach an express or implied term of the employment contract?

The first branch of the test requires that you review your employment agreement. If you had a written contract, this part will be uncomplicated because the terms of the contract will be clearly spelled out. If there is no employment agreement then it may be slightly more challenging and you will have to ask yourself what a court might infer from the conduct of the parties.  Also, you have to consider whether the employer unilaterally breached this term – meaning did my employer change the terms of my employment without my consent?  In Potter, the court held that under the first breach of the test, “if the employee consents to or acquiesces in [the unilateral change to an essential term], the change is not a unilateral act and therefore will not constitute a breach.  If so, it does not amount to a constructive dismissal” (para. 37).  Therefore, it is important for the employee to make it unequivocally clear that they refuse the change otherwise they will be deemed to condone it. 

Part 2:  If there is a breach, is it one that substantially altered an essential term?

Paragraph 39 of Potter sets out the second part of branch one: 

[39]  Once it has been objectively established that a breach has occurred, the court must turn to the second step of the analysis and ask whether, “at the time the [breach occurred], a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed” (Farber, at para. 26). A breach that is minor in that it could not be perceived as having substantially changed an essential term of the contract does not amount to constructive dismissal.

The “reasonable person” test is commonly used legal construct used by the courts to assist in reaching a fair and sensible outcome where the court will infer what a person of ordinary intelligence and robustness would do in the same circumstances as the employee.  

Wagner J., writing for the majority in Potter, noted that the employer’s actual intention is irrelevant:

There is no requirement that the employer actually intend no longer to be bound by the contract. The question is whether, given the totality of the circumstances, a reasonable person in the employee’s situation would have concluded that the employer’s conduct evinced an intention no longer to be bound by it. However, with respect for Cromwell J.’s [minority] opinion, the perspective here cannot be stretched so far as to allow the employee to rely on grounds that, although real, were unknown to him or her at the relevant time. Such an approach would risk encouraging disgruntled employees who have quit their jobs to allege constructive dismissal and engage in fishing expeditions against their employees in the hope of identifying evidence in support of their claims (Potter, at para. 63).

The court in Persaud v. Telus Corporation, 2016 ONSC 1577 made it clear that under the first branch of the Potter test, a unilateral change in an employee’s hours, whether it is a significant increase or decrease, can constitute a change to an essential term of the employment contract, even if the changes are imposed by the employer in good faith to address business concerns (Persaud at para. 45).

The Second Branch of the Test – A Series of Acts

As noted, the second way to establish constructive dismissal does not require the employee to point to a specific breach of the employment contract, but a series of acts that, when taken collectively, amount to a repudiation of the contract.  This commonly occurs when an employee is subjected to a toxic or “poisoned” work environment and the employer refuses to take effective action against it.  The employee must establish serious wrongful behaviour that creates a hostile or intolerable work environment.  Unless there is a particularly flagrant stand-alone incident, the behaviour must be persistent or repeated (Persaud, at para. 47).

[48]           A workplace becomes poisoned only where serious wrongful behaviour is demonstrated. The employee bears the onus of establishing a claim of a poisoned work environment. The test is an objective one, as an employee’s subjective feelings or genuinely-held beliefs are insufficient to prove a poisoned work environment (Persaud, at para. 48).

[49]           The above test has been applied to dismiss constructive dismissal actions when there are single or limited instances of either disparaging remarks, inappropriate name-calling, or an aggressive employer (Persaud, at para. 49). 

[50]           A high-pressured and tense office environment is insufficient to establish a claim for constructive dismissal. This is especially true in high-pressured industries when the employee is aware of the highly competitive environment (Persaud, at para. 50).

Constructive dismissal cases are a complex subset of employment law where the outcome tends to be unpredictable is very fact-specific.  If you have gone through the Potter steps and believe that you have been constructively dismissed because of either a fundamental breach, or a series or acts which cumulatively make it clear your employer no longer intends to be bound by the contract, it is important to seek informed legal advice.  An experienced lawyer can advise you of your rights and assist you in putting together a strong case. 






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