Don’t make assumptions when claiming constructive dismissal

By Tony Poland, LegalMatters Staff • When it comes to making a constructive dismissal claim it is never wise to assume you have the legal high ground, says Toronto employment lawyer Jeffrey M. Andrew.

Telling your employer that you have been constructively dismissed, quitting and/or filing a lawsuit without the proper advice can be costly since the issue of who is right and who is wrong is not always clear, says Andrew, a partner with Cavalluzzo LLP.

“It can be a mistake to simply assert constructive dismissal without getting legal advice because if you’re wrong, the loss of employment and income could be significant,” he tells LegalMattersCanada.ca. “The risk is that if you make a claim that happens to be wrong, your incorrect assertion effectively becomes an ill-advised resignation, which entitles you to nothing and now you no longer have a job. Making the wrong assumption can be huge.”

Constructive dismissal essentially occurs when there is a significant change in the employment agreement by the employer that violates the terms of the original deal in a way that is unfavourable to the employee and which they do not by words or actions accept.

The legal test for constructive dismissal

The Supreme Court of Canada clarified the legal test for constructive dismissal in Potter v. New Brunswick Legal Aid Services Commission.

“The court must first identify an express or implied contract term that has been breached and then determine whether that breach was sufficiently serious to constitute constructive dismissal,” the court writes. “However, an employer’s conduct will also constitute constructive dismissal if it more generally shows that the employer intended not to be bound by the contract.

“Constructive dismissal can take two forms: that of a single unilateral act that breaches an essential term of the contract, or that of a series of acts that, taken together, show that the employer intended to no longer be bound by the contract. In all cases, the primary burden will be on the employee to establish constructive dismissal, but where an administrative suspension is at issue, the burden will necessarily shift to the employer, which must then show that the suspension is reasonable or justified.”

Andrew says the fundamental issue to be addressed is “was there a repudiation of your employment agreement by your employer.”

‘Easy to say but sometimes difficult to prove’

“Which sounds simple in principle but isn’t always that way in practice,” he says. “People will say they have been constructively dismissed, which is easy to say but sometimes difficult to prove.

“You can argue your employer unilaterally changed your employment contract in a fundamental way. But it always begs the questions, ‘What is your employment contract? In what way was it altered? And is it truly fundamental or did the employer have an express or implied right to make the change? That is where it can get murky.”

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Another complicating factor can be defining the terms of employment, says Andrew.

“It helps if you have a written employment contract, but many people don’t,” he says. “They have an oral understanding.”

A reduction in salary is the typical reason workers claim constructive dismissal, along with a demotion or a significant and negative change in responsibility, says Andrew. 

Ongoing abuse or harassment is another reason for claiming constructive dismissal and in such cases, the employer would also be subject to the Ontario Human Rights Code as well as Occupational Health and Safety Act provisions.

Pandemic has led to inconsistent court rulings

Andrew says he has dealt with employees who have been laid off temporarily, which may also be grounds for constructive dismissal. But the effect of the COVID pandemic on business and related changes under the provincial Employment Standards Act, 2000 has led to inconsistent decisions from the courts as to whether a related temporary layoff is or is not a constructive dismissal.

“Unless the employer has a provision in their employment agreement that says they’re entitled to lay you off, the common law pre-COVID did not give much of a defence,” he says. “They agreed to employ you and they never said that they would suddenly, even temporarily, stop paying you and not let you work. But COVID has made the legal landscape more tricky now.”

However, just because an employee’s job has changed it doesn’t mean they have a good claim, says Andrew.

“Many times, employers are seen to have the right to make some adjustments. No business stays static forever,” he explains. “If it amounts to a demotion, a substantial negative change or a reduction in your responsibilities, then you might have a claim.”

Andrew says there are cases where employees may have had a legitimate claim but they acted too slowly.

Failing to act in timely fashion can be costly

“If the employer unilaterally does something that could constitute constructive dismissal but you don’t speak up and oppose the change and instead go along with it for a lengthy period, it will be argued that you have basically accepted it. It’s difficult to argue constructive dismissal after that,” he says. “If you say you don’t agree, then you’re preserving your right to challenge the decision.”

“But there’s a risk that at some point the court just infers that you accepted the change if you don’t politely push back. Even if it’s grudgingly.”

Andrew says raising an objection is more prudent than simply quitting and filing a lawsuit. Mitigating your damages is also important, so if your employer offers a lesser job, you should seek legal advice before rejecting it, he says. 

“You could be correct that you were treated badly and constructively dismissed, but you could end up being owed nothing in damages because you didn’t comply with your duty to mitigate,” Andrew says. “If you are a corporate executive and your employer told you your job was being phased out but they could offer you a job on the plant floor, that may be a huge come down in pay and responsibilities and probably humiliating. So, it’s debatable whether that’s a reasonable mitigation offer that you would be expected to accept. That’s why you need a lawyer’s advice.”

He says you can disagree about a job change “without being rude about it.” As well, it is important to record everything that is happening and consider your options carefully.

“You should not simply assert a constructive dismissal claim because you could be deemed to have resigned,” Andrew says. “Don’t take a chance with your future. Seek advice.” 

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