FAQs About Constructive Dismissal for Ontario Employees (Part 1 of 2)

Written on behalf of Peter McSherry

Constructive dismissal is one of the most misunderstood areas of Ontario employment law. Many employees sense that something is seriously wrong with their working conditions but are unsure whether the change is unlawful, whether they are expected to continue working, or whether they are entitled to compensation. Because constructive dismissal claims are complex and highly fact-specific, employees often struggle to know where to start.

In this two-part series, we review the basics of constructive dismissal, with the aim of helping Ontario employees better understand this nuanced area of employment law.

What Is Constructive Dismissal?

Constructive dismissal (sometimes called “forced quitting”) occurs when an employer makes a significant change to an employee’s job or creates a work environment that becomes intolerable, effectively forcing the employee to resign. Although the employee technically leaves the position, the law treats the resignation as a termination because the employer’s actions made continued employment unreasonable.

Ontario courts recognize two main categories of constructive dismissal. The first involves a unilateral change to a fundamental term of employment, such as imposing a drastic pay cut, removing key responsibilities, or significantly changing the work schedule. The second category involves a poisoned or hostile work environment, often caused by ongoing harassment, discrimination, or retaliation, where a reasonable person would feel they have no choice but to resign.

In either scenario, the common thread is that the employer has fundamentally breached the employment contract, even if they have not formally terminated the employee’s employment.

How Do Courts Determine Whether a Change Is “Fundamental”?

Not every workplace change amounts to constructive dismissal. Employers in Ontario have the right to make reasonable modifications to job duties and workplace procedures as businesses evolve. The law does not expect a job to remain entirely static.

However, when a change strikes at the heart of the employment relationship, courts will consider it fundamental. Judges look at the nature of the job, the terms of the employment contract (written or implied), the employee’s seniority, and what a reasonable person in the employee’s position would think about the change.

For example, a senior manager who is suddenly demoted to an entry-level position, or a professional whose core responsibilities are removed, may reasonably conclude that the employer has fundamentally altered the role. A small variation in duties or a minor scheduling adjustment likely would not meet the threshold.

It is important to note that constructive dismissal does not require the employer to act deliberately. Even well-intentioned changes can be constructive dismissals if the impact on the employee is substantial.

What Types of Changes Commonly Lead to Constructive Dismissal?

While every case must be considered individually, some types of changes regularly appear in constructive dismissal claims. Significant reductions in pay, major alterations to working hours, or a shift from daytime to overnight shifts can all be considered fundamental changes to an employee’s work arrangement. Removal of staff supervision responsibilities, reassignment to menial tasks, or a substantial decrease in authority may also qualify.

In some cases, an employer’s decision to relocate an employee to a distant worksite can amount to constructive dismissal, particularly if the commute becomes unreasonable or if the employee was hired to work in a very specific location. Similarly, persistent harassment, bullying by management, or retaliation after raising concerns with HR can create a poisoned work environment.

What matters most is the severity and impact of the change. Even when the change appears to affect the entire workforce, the question remains whether it is sufficiently fundamental for that particular employee.

Can a Pay Reduction Lead to Constructive Dismissal?

A salary reduction is one of the clearest examples of a fundamental change. Ontario courts have sometimes found that significant pay cuts, whether salary, bonuses, commissions, or other compensation, can constitute constructive dismissal. There is no universal percentage that automatically triggers a claim.

The same applies to changes that undermine an employee’s ability to earn income, such as removing a territory from a salesperson or slashing a commission structure. Even if the employer characterizes the change as temporary or part of a restructuring, the impact on the employee’s financial well-being remains a crucial factor.

Where pay cuts are applied unevenly or target specific employees, additional issues of fairness and potential discrimination may arise.

What About Changes to Work Hours or Location?

Hours of work are often a central aspect of the employment contract, especially for employees who have long maintained a predictable schedule. For example, if an employee has worked regular business hours for several years and is suddenly moved to rotating shifts, overnight shifts, or split shifts, the change may be considered fundamental.

Relocation is also a common source of dispute. A move that significantly lengthens an employee’s commute, creates new childcare challenges, or disrupts established routines can constitute constructive dismissal. Courts will consider the distance, the employee’s circumstances, and the employer’s original expectations when the employee was hired.

Employers sometimes rely on relocation clauses in employment agreements to justify such changes. However, even where a clause exists, it must be applied reasonably and in good faith.

Can Harassment or a Hostile Workplace Lead to Constructive Dismissal?

Yes. A poisoned work environment is a recognized basis for constructive dismissal. This can arise from workplace harassment, discrimination, bullying, or any other conduct that makes it impossible to continue working safely and with dignity. When the behaviour is severe or persistent, and when the employer fails to take appropriate action, courts may find that the employee has been effectively dismissed.

A single serious incident, such as egregious harassment, can also justify a claim. More often, however, poisoned environment cases involve a pattern of dismissive, abusive, or exclusionary conduct. Employees who experience reprisal after reporting concerns may also have a claim for constructive dismissal.

The Occupational Health and Safety Act and the Ontario Human Rights Code impose duties on employers to maintain safe and respectful workplaces. Failure to meet these obligations can significantly strengthen a constructive dismissal case.

Contact Peter A. McSherry Employment Lawyer for Comprehensive Advice on Constructive Dismissal in Guelph

In Part 2 of our two-part blog series on constructive dismissal, we’ll answer more frequently asked questions, including some related to layoffs, the timing of quitting, and the distinction between constructive and wrongful dismissal. It is important to note that every case is fact-specific, and it is critical to contact an experienced employment lawyer about your constructive dismissal issue before making any major decisions.

Peter A. McSherry Employment Lawyer provides trusted employment law advice in Guelph and across the Greater Toronto Area, including complex matters involving constructive dismissal, toxic workplaces, and human rights and discrimination. To book a confidential consultation, please contact the firm online or call 519-821-5465.