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Constructive Dismissal: A Good Reason to Quit

What is Constructive Dismissal?

“Constructive Dismissal” is defined as a substantial and unilateral change to the terms or working conditions of employment. In other words, a constructive dismissal describes situations where, although an employer has not directly fired an employee, its actions or its failure to address issues, leaves an employee feeling like they have no choice but to resign. Another way to think about constructive dismissal is that it arises when an employee has a good reason to quit their job.

A relocation of the workplace from Toronto to India is a clear example of a substantial change. The determination becomes more nuanced and complex, however, in less obvious situations. For example:

  • Where an employee is moved from a salaried position to one based on commission; or
  • Where an employee is being transferred from a non-customer facing role to one that requires them to interact with customers regularly, although at the same rate of pay.

What makes a change “substantial”?

As you may have guessed from the definition of constructive dismissal, when deciding whether an employee has been constructively dismissed, the Courts have to decide whether the change in employment was “substantial”.

Determining what is a substantial or fundamental change to an employment agreement depends on facts and circumstances. The burden to prove that the facts and circumstances amount to a substantial change in employment is on the employee.

To provide guidance on the meaning of substantial in the context of a constructive dismissal, this article will look at the three situations in which constructive dismissal can occur:

  1. Where there is a change to some or all of the terms of employment (i.e. salary, hours of work, location, role, responsibility, etc.);
  2. Where the workplace becomes unsafe, hostile or toxic (i.e. a change in working conditions); and
  3. Where multiple small changes taken together become a substantial change.

Constructive dismissal due to substantial changes to the terms of employment.

In the eyes of the Court, employers are generally entitled to make minor unilateral amendments to employment terms when those changes are reasonable and/or contemplated as part of the employment agreement. The Courts do recognize that employers should be allowed some flexibility in structuring jobs as part of their authority in managing the business.

In deciding whether the change is substantial, the Courts apply an objective legal analysis. This means it doesn’t matter what the employee believes happened. The Court looks at the facts and circumstances and asks if a reasonable person in the employee’s shoes would find that the terms of employment had been significantly altered by the employer. They consider the nature and extent of the changes with specific attention and consideration to the intention of the parties at the time the employment contract was formed.

To prove constructive dismissal, the key is to be able to demonstrate that the change(s) were severe enough that a fundamental part of the agreement was altered.

Examples of Changes to Employment Terms

Some of the “substantial” changes taken by employers might look like:

  • a demotion;
  • a change to the employee’s reporting structure or job responsibilities;
  • a reduction to an employee’s compensation of more than 10%;
  • a change to an employee’s hours of work from day shift to a night shift; or
  • relocating the employee’s workplace resulting in a drastically increased or unreasonable commute.

Another example of a substantial change could be an unpaid suspension or layoff. As I discussed in more detail in Temporary Layoffs: What Everyone Needs to Know, employers are not allowed to layoff employees when it isn’t a written term of their contract or a standard industry practice. Accordingly, being laid off in almost every instance is a constructive dismissal.

Constructive dismissal due to unsafe, hostile or toxic work environment.

Employers are required to provide a safe and healthy work environment and that obligation is legally regulated through Ontario occupational health and safety legislation. An unsafe or unhealthy work environment may result in an employee being constructively terminated.

In cases of poor work environments, the Court will consider the facts and circumstance and apply an objective test. Is the workplace so unsafe, hostile or toxic that a reasonable person would not be expected to return? If the answer is yes, then the employee was constructively dismissed.

The following are some of the factors that will be considered to determine if constructive dismissal has occurred:

  • The serious wrongful behaviour is evident and its nature is such that it renders continued employment impossible;
  • The serious wrongful behaviour has been persistent or repeated;
  • The test applied is objective – that is, it is confirmed that someone in the employee’s shoes would consider the environment poisoned

Examples of unsafe, hostile, or toxic workplaces.

A good example of a toxic work environment is one in which the employer fails to prevent workplace harassment or bullying. Other examples include workplaces where unjustified criticism or vague and unfounded accusations of poor performance (especially by persons of authority) exist, a culture where sexism or racism is tolerated (if not actively encouraged), or where an employee is subject to extreme stress and unreasonable expectations or demands.

Multiple Small Changes Overtime May Constitute A Substantial Change to Employment

Although minor changes will not amount to constructive dismissal, a series of small changes might. The key is that the extent of the changes made to the terms of employment must add to a total change that is substantial or makes the employee feel that the employer is trying to have them quit.

For example, an employer might make a minor reduction in salary in January, then reduce employee benefits in March, then a small reduction in hours in April, perhaps then a restructuring to change an employees role to have less overall responsibility in July.. The total effect of those changes may add up to a substantial change to the terms of employment.

Employee’s Options In the Face of Substantial Unilateral Changes in Employment

An employee’s options in the face of a potential constructive dismissal are set out by the Ontario Court of Appeal in a case called Wronko v. Western Inventory Service Ltd. (which I’ve written about before in How to Change Employment Contracts). Those options are:

  1. Accept the change in the terms of employment, either expressly or implicitly through apparent agreement, in which case the employment will continue under the altered terms;
  2. Reject the change and sue for constructive dismissal if the employer persists in treating the employment relationship as being subject to the varied term; or
  3. Make it clear to the employer that they are rejecting the new term and insisting on the original terms of employment.

If an employee decides to continue to work under changed conditions, they may not be able to bring the matter to the courts at a later date. This legal principle is called condonation. If an employee condones the change through conduct, then they have implicitly accepted the change.

Risks on Employees

Usually, to claim constructive dismissal the employee actually has to quit and then sue. In this respect there is always a risk to the employee who makes a claim for constructive dismissal. If the employee is not able to prove that they have been constructively dismissed, then they will be found to have resigned from their employment. Having resigned, the employee will not be entitled to any damages for wrongful dismissal.


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

Temporary Layoffs: What Everyone Needs to Know

Temporary layoffs are an attractive option for employers facing economic downturn, business or financial troubles, or a global pandemic like COVID-19. While it may appear to be a good way to eliminate staff without paying termination pay or severance, there are many misconceptions that both employers and employees have.

This article aims to help you understand everything you need to know about temporary layoffs under Ontario employment law and should be used as a guide whether you are a business owner considering laying off staff or an employee who was laid off.

Temporary Layoffs Are Not Allowed for Most Employees

The first and most important thing to understand about temporary layoffs is that in most situations they are not allowed. There is no implied right to layoff an employee. Even though the ESA provides guidelines concerning the maximum length of a temporary layoff, the Ontario Courts do not permit an employer to layoff, or suspend an employee, without pay, unless:

  1. It is one of the written terms in the employment contract; or
  2. The layoff or suspension was agreed to by both employee and employer—this agreement can take the form of a written contract, a well-communicated policy or indirectly through a widely known practice within your employer’s organisation or industry (i.e. seasonal workers, construction industry, etc…).

Any layoff (even a temporary one) that doesn’t meet the above test is a constructive dismissal. The foundational case on this issue is Stolze v. Addario, 1997 CanLII 764, by the Ontario Court of Appeal, in which the Court wrote:

… the absence of evidence of a policy or practice within the employer company of laying off “key” employees, constitutes the lay-off a repudiation of a fundamental term of this employee’s contract. He was, therefore, constructively dismissed.

Read my earlier article Termination of the Employment Relationship in Ontario for more information.

Only if the employer makes it over this first and difficult hurdle, does the law concerning temporary layoffs become relevant.

What is a Temporary Layoff?

A temporary layoff is when a employee’s hours are reduced or eliminated on a short term basis with the intention that they will shortly be recalled. At the time an employee is laid off, an employer is not required to provide a specific recall date, however, if they do, they must generally comply with it.

The maximum length of a temporary layoff is specifically defined in the Employment Standards Act (“ESA”). If an employee’s layoff lasts even just one day longer than the specified time set out in the ESA, then the employee has been terminated retroactive to the first date of the layoff. As a result, that terminated employee is entitled to pay in lieu of notice and severance. 

The definition of temporary layoff according to the Employment Standards Act is as follows:

What constitutes termination
56 (1) An employer terminates the employment of an employee … if, …

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.

Temporary lay-off
(2) For the purpose of clause (1) (c), a temporary layoff is,

(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(i) the employee continues to receive substantial payments from the employer,

(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,

(iii) the employee receives supplementary unemployment benefits,

(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,

(v) the employer recalls the employee within the time approved by the Director, or

(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee;

If the specific requirements for a layoff to be considered “temporary” are not met than that layoff is a termination. In a nutshell (and explained in more detail below), if your layoff lasts longer than the temporary layoff time periods or does not meet any of the conditions set out above, the employer is considered to have terminated the employee’s employment. The employee will therefore be entitled to termination pay, severance or damage for wrongful dismissal

Temporary Layoffs of More than 13 Weeks but less than 35 Weeks

A layoff more than 13 weeks but less than 35 weeks, can only be considered temporary where at least one of the following conditions are met:

  1. The employee continues to receive substantial payments from the employer;
  2. The employer continues to make RRSP, pension plan, or group health and/or dental insurance plan contributions;
  3. The employee receives supplementary unemployment benefits (or would be entitled to receive this benefits if not for the employee having alternative employment during this period); or
  4. the employer recalls the employee within the time approved by the Director.

Ongoing “Substantial Payments” or Benefit Plan Contributions by Employer

The payments contemplated under 1 and 2 need to have been made throughout the entire period of the temporary layoff in order to satisfy this condition. If the employer did not make regular and on going payments during the first 13 weeks of the temporary layoff or stopped making payments at any time, this condition is not satisfied.

The term “substantial payment” is not defined and will likely depend on any individuals particular employment circumstances. Employers and employees should consider getting legal advice on this requirement because it will be highly case specific.

With respect to benefit plans, specifically, the terms of the plans provided by the employer must be the same as before the layoff began (unless the employee specifically agreed to an amendment to the plan or the amendment was made for a legitimate cause such as a legislative change). Employers cannot drastically cut benefits and then continue making the reduced payment in an attempt to get around this requirement.

Supplementary Employment Benefit (SUB) Plans

The Government of Canada offers a program called the Supplementary Unemployment Benefit Plans (SUB Plans) that provides employers with the ability to set up and provide additional financial assistance to employees during a period of layoff due to temporary stoppage of work, training, or illness, injury or quarantine.

If an employer has a SUB plan, employees will likely already know about it. This plan provide to employees a top up of some amount over and above EI. For more details consider the Government of Canada’s Guide to Supplementary Employment Benefit Program.

Approval by Director of the Ministry of Labour

In special circumstances the Director of the Ministry of Labour can provide exceptions to certain employers. Employers would be obliged to inform their employees.

Other Frequently Asked Questions

How do employees recall temporarily laid off employees?

During a temporary layoff, an employer upon notice to their employee, can set a recall date requiring the employee to return. Typically, this is done by the employer providing a “recall notice” informing the employee of the return to work date.

What happens if an employee is recalled in a situation where the layoff was wrongful or not temporary?

If an employee is provided with a recall date that either (a) falls outside or afoul of the temporary layoff provisions in the ESA, or (b) in the course of a layoff that was never permitted in the first place, then the employee has two options:

  1. Return to work and abandon his claim to termination pay, severance pay and/or damages for wrongful dismissal; or
  2. Refuse to return to work and claim constructive dismissal,

Only in rare circumstances are both options available. If an employee refuses to return to work and claim constructive dismissal they would be obliged to comply with their Duty to Mitigate.

What happens if an employer is unable to recall an employee during a temporary layoff? 

If an employer is unable to recall the laid off employee for any reason, even if doing so was unintentional or through no fault of their own, the layoff becomes a termination and the employee is entitled to termination pay, severance pay and/or damages for wrongful dismissal.

What if an employee’s job is no longer available?

Generally, an employee should be recalled to the job they had before the layoff. However, if the job is no longer available, the employee must be given a similar or comparable position with the same or greater benefits and pay.

What if an employee refuses to return after a temporary layoff?

Employees are considered employed during a temporary layoff and, therefore, are required to return upon being recalled by their employer. A refusal to return may be considered job abandonment.

What about temporary layoffs for unionised workers?

The above legal information is generally applicable only to non-unionized employees. If you are in a union you need to speak with your union representatives.

What about temporary layoffs because of COVID-19?

The COVID-19 pandemic is novel and unprecedented. While it may not have an effect on the current law, it is important to understand that there is no way to know for certain how Ontario employment law might change or how the Courts may react. If you are facing a particular employment issue because of COVID-19, you should speak to a lawyer. 


Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.


The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.