Reading between the lines: the blurry law of constructive dismissal

Posted on March 8, 2017 · Posted in Blog

It is rarely easy when the employment relationship comes to an abrupt end. And it isn’t always clear cut, either. There is no ambiguity of dismissal when an employee receives a notice of termination and/or pay in lieu to indicate the end of the relationship of employment. Yet there are many situations in which an employee has not actually been dismissed, but either the work environment becomes so toxic, or the employer frustrates the terms of the employment contract.

An employee is constructively dismissed when their employer has created an impassable situation in which they believe they have no other rational choice, but to resign their post. The dismissal is constructive because it is not formal, but implied by the conduct of the employer that frustrates the employment contract. Since the claim of constructive dismissal is made by implication, it requires some reading between the lines in order to be made successfully.

In Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, the Supreme Court of Canada has provided a constructive (no pun intended!) test with two distinct branches to determine whether the claim has been made:

1. Has a breach of the employment contract occurred by a single unilateral act of the employer? If so:
a. Does that breach substantially alter an essential term of the employment contract?
b. Would a reasonable person in the same situation as the employee have felt that the essential terms of the     employment contract were being substantially changed?
2. Has there been a series of acts that, taken together, show that the employer intended to no longer be bound by the employment contract?

Most noteworthy is that the breach by the employer must “substantially alter” an essential term of the employment contract. The alterations cannot be minor or cosmetic but rather must go to the root of the contract of employment. The court also uses a “reasonable person test” to determine whether someone else in a similar situation could  consider that the employment contract was being substantially changed. Since the test is based on a subjective appraisal of the employee, (b) is meant to back up the veracity of the employee’s perception that there has been a substantial alteration.

The most common types of changes that are indicative of constructive dismissal include, but are not limited to the following:

An employer has a duty to act in good faith when dealing with its employees, and all the indicators listed above relate to circumstances where an employer fails to do so, and as such frustrates the contract of employment in such a way that both (a) substantially alters the employment relationship and (b) in such a way that a reasonable person in a similar situation would consider the essential terms of the contract to be broken.

If an employee does believe that there are grounds for constructive dismissal, it does make sense to quit as a means of launching the process. An employee that has been constructively dismissed is entitled to reasonable notice and/or pay in lieu, pursuant to the Employment Standards Act, 2000 and/or common law. An employee that does not quit soon after what they consider to be a substantial alteration will be deemed to have accepted the new terms of employment, and lose their right to make a claim for constructive dismissal.

Making a constructive dismissal claim can be complicated, as the subjective requirements to establish it are not always obvious. It is always highly advisable to seek independent legal advice before determining whether to move forward with a constructive dismissal claim.

If you are not sure whether you or someone close to you has been constructively dismissed, click here to set up a complementary consultation.