What is Constructive Dismissal?

What is Constructive Dismissal?

by Toronto Employment Lawyer Karen Zvulony

As a general rule, employees who quit their employment are not entitled to compensation from their employer. However the exception to this general rule is where an employee quits because their employer unilaterally and fundamentally changed the conditions of employment. The law classifies such situations as a ‘constructive dismissal’. In other words, the employer did not directly dismiss the employee but the employer changed the job so completely that the employment contract was effectively at an end.

This distinction is significant, because if an employee voluntarily quits, their employer would not be legally obliged (unless agreed to otherwise between the parties) to pay the employee compensation. If, however, the employee is constructively dismissed, the effect is the same as if the employer had wrongfully dismissed the employee (i.e. not provided reasonable notice or just cause). With constructive dismissal, the employee is, therefore, entitled to the same notice period and or compensation in lieu of notice as if they had been wrongfully dismissed.

Examples of some fundamental changes to the conditions of employment that may be classified as a constructive dismissal are: substantial reduction in pay; reduction in hours; change in duties and responsibilities; and requirements that the employee relocates to another city (provided this was never part of the employment contract). Minor incidental changes will generally not be enough to sustain a constructive dismissal claim.

The concept of constructive dismissal has emerged in recognition of the inequality in bargaining power in the employment relationship. If not for constructive dismissal, employers could simply force employees to quit in an effort to avoid having to give reasonable notice or provide compensation in lieu of notice.

The burden is on the employee to prove that they have been constructively dismissed.  The employee needs to prove that the employer made a fundamental change and that this change was made unilaterally. The success of such a claim will largely depend on the facts of each particular situation. Therefore, employees are strongly encouraged to speak with a lawyer and obtain legal advice before they decide to end their employment and sue for constructive dismissal.