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

Written on behalf of Peter McSherry

Constructive dismissal remains a frequently misunderstood aspect of employment law in Ontario. Employees often recognize that their work environment has undergone a significant and troubling shift. However, they may not know whether the change is legally permissible, whether they must continue in their role, or whether they may be owed compensation. Given that constructive dismissal assessments are highly fact-driven and legally intricate, many individuals are uncertain about how to evaluate their situation or assert their rights.

This is Part 2 of our two-part blog series outlining the fundamental principles of constructive dismissal. In Part 1, we discussed many of the basic principles surrounding constructive dismissal. This part will focus on some more specific aspects of this area of Ontario employment law.

Does a Temporary Layoff Count as Constructive Dismissal?

In some cases, it might. Under the Employment Standards Act (ESA), temporary layoffs are permitted for ESA purposes only, meaning they do not automatically constitute termination under the statute if the employer follows ESA rules. However, ESA compliance does not prevent a temporary layoff from being a constructive dismissal at common law. As a result, a temporary layoff can constitute constructive dismissal unless the employee has previously agreed, in writing or through clear workplace practice, that layoffs are a normal part of the employment relationship.

Does the Employee Have to Resign Immediately to Claim Constructive Dismissal?

Not always. Courts recognize that employees may need time to assess the situation, seek legal advice, and attempt to resolve issues internally. A brief period of continued employment does not necessarily mean that the employee has accepted the change; it may simply indicate that the employee is still employed.

However, employees must be careful. If they continue to work under the new terms for too long, courts may find that the employee has implicitly accepted the change, making a constructive dismissal claim more difficult.

In cases involving a poisoned work environment, the timing can be even more delicate. Remaining in the workplace for the sake of financial or personal necessity does not automatically eliminate the claim; however, courts will consider whether the employee’s conduct is consistent with that of someone who views themselves as effectively dismissed.

What Compensation Is Available After Constructive Dismissal?

Employees who successfully establish constructive dismissal are typically entitled to compensation similar to what they would have received if they had been wrongfully dismissed. This may include common-law reasonable notice damages, continuation of benefits during the notice period, and in some cases, compensation for lost bonuses, commissions, or other financial entitlements.

The amount of reasonable notice is determined by factors such as age, length of service, position, and the availability of comparable employment. Employees in specialized or senior roles often receive longer notice periods.

If the case involves harassment, discrimination, or violations of human rights legislation, additional remedies, such as general damages for injury to dignity, may also be available.

Should an Employee Leave Immediately If They Suspect Constructive Dismissal?

Employees should seek legal advice before quitting. While resigning is often part of a constructive dismissal claim, timing and strategy are critical. Resigning prematurely may weaken the claim, while staying too long may be interpreted as acceptance of the employer’s changes.

In many cases, employees benefit from submitting a written objection to their employer, outlining the changes and stating that they do not accept them. This helps preserve the employee’s legal position while discussions continue.

Constructive dismissal law is highly nuanced, and employees should understand their risks and options before making any major decisions.

Can an Employer “Correct” the Change After the Employee Objects?

Employers sometimes attempt to reverse a change after an employee asserts constructive dismissal. For example, they may reinstate the original pay, restore duties, or withdraw a demotion after recognizing the potential legal consequences.

Ontario courts consider whether the employer’s corrective actions are genuine, timely, and completely restore the original employment terms. If the employer’s response is ambiguous, incomplete, or delayed, the constructive dismissal may still stand. Additionally, if the workplace has already become poisoned by harassment or retaliation, restoring job duties may do little to fix the underlying harm.

Employees should document all communications and seek legal guidance when an employer attempts to reverse a change.

What If the Employer Claims the Change Was Necessary for Business Reasons?

Constructive dismissal does not depend on the employer’s motives. Even when an employer acts in good faith, fundamental changes can still constitute a breach of the employment contract. Courts recognize that businesses evolve, but the legal framework safeguards employees from having their core terms of employment altered unilaterally.

An employer cannot avoid liability by arguing that the change was required due to economic pressures, restructuring, or operational needs. While the employer’s business rationale may be relevant to practical negotiations, it does not eliminate the employee’s rights.

How Does Constructive Dismissal Differ From Wrongful Dismissal?

Wrongful dismissal occurs when an employer directly terminates an employee without providing appropriate notice or pay in lieu of notice. Constructive dismissal, by contrast, is a termination disguised as a resignation, triggered by the employer’s unlawful behaviour.

In both cases, the primary issue is whether the employee receives proper compensation for the termination. The remedies are often similar, and constructive dismissal is usually analyzed under the same principles that govern wrongful dismissal.

The key difference lies in how the termination occurs and whether the employer’s actions forced the employee to leave.

What Should an Employee Do If They Believe They Have Been Constructively Dismissed?

Employees should begin by documenting the changes or incidents that raised concerns. This may include emails, schedules, performance reviews, pay statements, or records of conversations with supervisors. Written evidence can be crucial in demonstrating the nature and impact of the change.

Employees should avoid resigning impulsively and instead seek legal advice before taking any steps. A lawyer can assess the situation, advise on preserving the claim, and help strategize communications with the employer.

Many cases resolve through negotiation without going to court, often resulting in a severance package that reflects the employee’s rights under Ontario law. Working with counsel also ensures that any settlement agreement properly accounts for key considerations, including notice, benefits, bonuses, commissions, employment references, and other essential factors.

Understanding Your Rights Before Taking Action

Constructive dismissal is a powerful legal remedy for employees whose working conditions have undergone significant changes or deteriorated to the point of being intolerable. However, it is also a complex area that requires careful analysis. Because every situation is unique, and because timing and documentation play critical roles, employees are strongly encouraged to seek personalized legal advice before making decisions.

When handled correctly, a constructive dismissal claim can provide financial security, protect the employee’s dignity, and ensure a fair resolution following an employer’s breach of the employment relationship. Understanding your rights is the first step in safeguarding your career and your future.

Peter A. McSherry Employment Lawyer: Providing Skilled Guidance in Constructive Dismissal Cases in Guelph

If you believe your employer has fundamentally changed your job, reduced your hours or pay, or created a work environment that has become intolerable, you do not need to navigate the situation alone. Constructive dismissal claims are time-sensitive and highly fact-specific, and the decisions you make now can significantly affect your rights, compensation, and future employment prospects. Peter A. McSherry Employment Lawyer can assess your circumstances, explain your options, and help you take strategic next steps. Contact our firm online or call 519-821-5465 to book your consultation.