Constructive Dismissal What It Is and How Employers Can Avoid It
You do not have to fire someone to be liable for wrongful dismissal in Ontario. Constructive dismissal is one of the most litigated and most misunderstood concepts in employment law.
What is Constructive Dismissal?
Constructive dismissal occurs when an employer makes a fundamental, unilateral change to an employee's terms of employment without consent and the change is so significant that it amounts to a repudiation of the employment contract. The employee can resign, claim constructive dismissal, and sue for wrongful dismissal damages as though they had been terminated. No termination letter is required for liability to arise.
What Qualifies as a Fundamental Change?
- Significant pay cut Ontario courts have found reductions of 15–20% or more to constitute constructive dismissal
- Significant demotion reducing responsibilities, removing direct reports, stripping title without consent
- Geographic relocation requiring relocation to a different city without a relocation clause in the contract
- Hostile work environment systematic harassment, humiliation, or isolation of the employee
- Material change in hours or schedule significant unilateral changes to when and how much an employee works
- Suspension without pay unless justified by contract or statute
The Employee's Options After a Fundamental Change
- Accept the change continue working under new terms, which waives the constructive dismissal claim
- Reject and resign treat the contract as repudiated and claim constructive dismissal
- Work under protest continue working but immediately notify the employer in writing that the change is not accepted; this preserves the claim for a limited period
An employee who continues working under changed terms for a long period without objecting may be found to have accepted the change and lost the right to claim.
How Employers Can Avoid Constructive Dismissal Claims
Preventive measures:
- Include a flexibility clause in employment contracts allowing reasonable adjustments to duties, location, and reporting but this cannot justify fundamental changes
- Get written employee consent with fresh consideration (a raise, a bonus) for any material change to compensation, role, or location
- Give reasonable advance notice of any change, even where consent is not possible
- Address performance issues through proper processes do not sideline or marginalize as an alternative to proper termination
- Take workplace conflicts seriously a hostile environment can constitute constructive dismissal even without deliberate intent