Constructive Dismissal in Ontario: What You Need to Know

In Ontario, the term constructive dismissal refers to a situation where an employee is not explicitly fired but is treated in such a way that continuing in their position becomes unreasonable. These changes—often significant and unilateral—can lead the courts to treat the resignation as a dismissal in law.

If you’re facing major changes to your job, it’s important to understand your rights and how constructive dismissal works in Ontario.

What Is Constructive Dismissal?

Constructive dismissal occurs when an employer makes fundamental changes to the terms or conditions of employment without the employee’s consent. These changes are so substantial that they amount to a breach of the employment contract, effectively forcing the employee to resign.

Common examples include:

• A significant reduction in pay or working hours

• Demotion or major changes to job duties

• Relocation to a far-away office without agreement

• Suspension without pay or benefits

• A hostile or toxic work environment

If a court agrees that the changes were significant enough to break the employment agreement, the resignation is treated as a dismissal—entitling the employee to severance or damages.

Legal Framework in Ontario

Constructive dismissal is guided by both common law principles and the Employment Standards Act, 2000 (ESA). While the ESA sets out minimum entitlements like termination pay, the common law often entitles employees to greater compensation depending on factors like age, length of service, and position.

Case Law: Farber v. Royal Trust Co. (1997)

A leading case on constructive dismissal is the Supreme Court of Canada decision in Farber v. Royal Trust Co.

Facts:Jean-Pierre Farber was a Regional Manager in Quebec, overseeing 21 offices and 400 agents. He earned about $150,000 annually, including a guaranteed base salary of $48,800. In 1984, his employer eliminated his role and offered him a position as Branch Manager at a much smaller, unprofitable office—essentially a demotion to a job he had held eight years prior. The new role came with commission-based pay only, cutting his income by about 50%.

Farber tried to negotiate a better position or income guarantee. When the employer refused, he declined the new role and sued for constructive dismissal.

Decision:The Supreme Court ruled in Farber’s favour. The Court found that the new role and compensation package fundamentally altered the nature of his employment. The employer’s actions amounted to constructive dismissal, and Farber was entitled to damages as if he had been terminated.

Key Takeaway:If your employer makes substantial, unilateral changes that alter the core terms of your job—such as duties, compensation, or seniority—you may be entitled to claim constructive dismissal.

What to Do If You Think You’ve Been Constructively Dismissed

1. Don’t resign immediately. Premature resignation can undermine your legal position.

2. Document everything. Keep a detailed record of changes to your role and communications with your employer.

3. Consult an employment law professional. Legal advice is crucial to evaluate your case and preserve your rights.

4. Consider your options. You may be entitled to compensation or a negotiated severance package.

FAQ: Constructive Dismissal in Ontario

Q: Is a pay cut enough to claim constructive dismissal?

A: Yes—if the cut is significant and not agreed upon, it may qualify.

Q: How much severance can I get?

A: You could be entitled to ESA minimums or, under common law, several months’ pay depending on your role, age, and tenure.

Q: What if I keep working after the change?

A: Continuing to work may be interpreted as acceptance. It's important to respond promptly if you believe your rights are being violated.

Q: Can workplace harassment lead to constructive dismissal?

A: Yes. If your employer fails to address a toxic environment, you may have grounds for a claim.

Final Thoughts

Constructive dismissal is about more than just job dissatisfaction—it's about whether the core terms of your employment contract have been fundamentally altered. If you feel you've been forced to leave your job due to unfair treatment or sudden changes, it’s critical to seek legal guidance before making any decisions.

In employment law, timing and documentation matter. A well-informed decision today could protect your future.

Disclaimer

This blog post is intended for informational purposes only and does not constitute legal advice. Employment law is highly fact-specific and outcomes can vary. If you believe you have experienced constructive dismissal or another employment-related issue, you should consult a qualified employment lawyer or paralegal licensed in Ontario to obtain advice based on your specific situation.