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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.

Negotiating Maximum Termination Pay and Severance Pay

Often, people who lose their job assume that if they receive any termination pay, severance pay, or pay in lieu of notice then they must have been properly compensated for being fired. This is far from the case. There are many factors and considerations a person should be aware of when figuring out what their termination entitlements are and more often than not an employment lawyer can help them get what is fair.

Statutory Minimum Notice Periods VS Common Law Notice Periods

Upon being fired, an employee is entitled to receive either (1) working notice, or (2) pay-in-lieu of notice. Working notice is not unusual but more often than not an employee is unhappy about being fired and an employer is concerned that the employee may do something to hurt the employer’s business while working to the end of the notice period. For that reason, employers usually chooses to terminate the employee immediately and, provide pay in lieu of notice.

The Employment Standards Act contains only the minimum entitlements that employees must receive on termination. Likewise, the Canada Labour Code sets out the minimum notice periods and severance entitlements for federally regulated employees (i.e. banking and telecommunications). However, just like the minimum wage, most employees should get a lot more than the minimums.

Judge made law or otherwise the law made by the Courts is called the “common law”. It entitles most employees to “reasonable notice”. Reasonable notice is much greater than the statutory minimums. Employees default to getting common law reasonable notice, unless they have a written employment contract that says otherwise.

There is no set formula to calculate common law notice. Generally, it is accepted that the average short-term employee is owed three to six months of notice, a long-term employee in a senior position may be owed up to 24 months or more, and somewhere in the middle for the other lengths of employment. How senior the employee’s position is will also be a factor. For example, a vice president or manager may be entitled to higher pay in lieu of notice that an employee doing a low level job, even for the same length of time. The employee’s age and the availability of alternative employment are also factors the Courts consider.

You can learn more about ‘Reasonable Notice’ and what the appropriate length is for different employees in my earlier article on “How much notice/severance should I get after being fired?.”

Termination Clauses

A termination clause in an employment contract alters an employee’s entitlements to common law reasonable notice. While it could technically provide for more, more often than not, employers include termination clauses to limit what an employee would otherwise get after being fired. Termination clauses cannot limit entitlements to below the minimums.

Where there is a valid and enforceable termination clause, an employee would not be successful if they attempted to seek more in a wrongful dismissal action. Fortunately, the Courts are often persuaded to strike out termination provisions. There are a number of different reasons that a court might find a termination clause unenforceable, such as pressure being put on the employee at the time of signing of the contract or where the limits on the severance pay are less than the minimums. If the termination clause is successfully struck out common law notice applies.

An experienced employment lawyer can offer advice on options on how to deal with terminations — for example whether one should sue for wrongful dismissal or alternately file a claim for termination pay or severance pay with the Ministry of Labour. It should be noted that a person cannot do both – sue for wrongful dismissal and file a claim for termination or severance pay. Seeking legal advice on rights is recommended to make the right decision. An employment lawyer can also help ensure payments for common law notice are maximized either through court action or a negotiated settlement.

When are termination clauses unenforceable?

In Movati Athletic Group v Bergeron, an employee had worked for about 16 months before she was terminated without cause. Purporting to rely on the termination clause in her contract, the company gave her the minimum entitlements under Ontario’s Employment Standards Act, 2000 (ESA). The employee claimed damages for wrongful dismissal arguing that the termination clause in her employment contract was not clear enough to rebut the presumption that she was entitled to common law reasonable notice of termination.

The court found the termination clause not clear and as a result, the employee received three months’ pay in lieu of reasonable notice of termination instead of her statutory minimum entitlements. This case illustrates how important it is for employers to make all efforts to expertly craft termination clause wordings and how important it is for employees to have their employment contracts checked by a lawyer before deciding whether it is actually enforceable.

A court will not enforce a termination clause that excludes minimum statutory entitlements upon dismissal as set out in the ESA or Canada Labour Code. It is illegal for an employer to provide less than the minimum standards of the ESA or Code, even if the employee has voluntarily agreed to accept a lower amount. Additionally, a court will not enforce a termination clause if it has not been properly drafted. Poorly drafted clauses are very common and any ambiguity in the language in the termination clauses usually acts against the employer.

Termination Provisions must use the clearest possible language when trying to limit an employee’s rights upon termination. Failing to use explicit language leaves the door open for varying views and interpretations of intention and, therefore, the clause may be set aside by a court for ambiguity.  Courts resolve drafting ambiguities in favour of employees.

Laws on termination clauses continue to evolve. It is important to keep abreast of changes and consult with employment lawyers when employers are drafting clauses or when you, an employee, are terminated


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.

The Duty to Mitigate

When employees are dismissed with cause or without just cause, they are obligated to make a reasonable effort to find comparable new employment within the period of reasonable notice. This obligation is referred to as their “Duty to Mitigate”. In other words, employees have an obligation to do what they can to limit the damage they may have suffered from their termination. They cannot sit back and do nothing to find another job throughout the notice period and just charge that to their former employer.

In this article, we will review what employees and employers need to know about the duty to mitigate, including factors to consider and how courts decide on whether or not it is met.

What is the Duty to Mitigate?

The duty to mitigate is engaged within a reasonable period of time after an employee is terminated. Employers may argue in court that damages are not owed because the employee could have been re-employed if they tried harder to find a comparable job. In these cases the courts make thorough assessments of effort and consider a broad range of factors, circumstances and evidence. Awards will be significantly reduced if the courts find that efforts are found to be insufficient or if the employee unreasonably refused alternate comparable employment. 

Employees are expected to take steps that any reasonable person in a similar situation would take to find comparable employment and to accept that employment if it becomes available. Of note, though, a dismissed employee is not expected to accept employment that isn’t comparable to their former position. For example, a senior executive at one company wouldn’t be expected to take on an entry-level or mid-management position elsewhere just for the sake of being employed.

What does comparable employment mean?

The Ontario Court of Appeal has emphasized that “comparable employment” does not mean “any employment”. In order to be “comparable”, offers of employment must be comprehensive of the status, hours, and remuneration of the employee’s employment with his/her former employer.

How to Mitigate?

There are different ways that employees can mitigate their damages from a wrongful or constructive dismissal. An employee can accept:

  1. Re-employment with the same employer
  2. Employment in a non-comparable job position, or
  3. Employment in a comparable job position

Re-employment with the same employer

In some cases, an employer may dismiss an employee from their job, but offer a different position within the company or the same position but at a reduced pay rate or reduced level of responsibility.

Several judges have concluded that an employee can refuse an offer of alternative employment with the same employer where the work environment the employee would be returning to is hostile or would cause loss of dignity or embarrassment. Courts look at the entire context including the employee’s relationships with individuals at the former workplace, salary, and similar work conditions and responsibilities.

Lets look at three legal cases that cover different decision outcomes.

Dussault v Imperial Oil Limited

The Ontario Court of Appeal found that two employees who refused offers of employment from the purchaser of their employer did not fail to mitigate their damages since the employment that was offered was not “comparable.” In the case, the plaintiffs received less favourable offers of employment — offers where their salaries would be reduced after a period of 18 months and their prior service with Imperial would not be recognised. As a result, they both rejected the offers and brought a wrongful dismissal action against Imperial. 

The case went before the Court of Appeal during which time Imperial Oil argued that the motion judge erred in failing to find that the employees had not mitigated their damages by accepting comparable employment with Mac’s (who had purchased the previous employer). The Court rejected that argument and agreed with the decision of the motion judge that the employment offered by Mac’s was not comparable and that it would have resulted in an immediate, substantial decrease in the plaintiffs’ benefits, as well as a material drop in their base salaries. As well, the Court found there was no reason to depart from the well-established principle that “comparable employment” does not mean “any employment,” and requires an offer with comparable status, hours, and pay.

Benjamin v. Cascades Canada ULC

In this case, an employee chose to retrain instead of accepting a comparable employment offer and the Court fund that the duty to mitigate was not met. The Judge wrote: “retraining on its own is not evidence of a failure to reasonably mitigate damages; rather, if an employer can establish that comparable work is available and the employee made a choice to retrain and not to seek comparable employment, retraining would not constitute reasonable mitigation.”

This case indicates that retraining can be considered reasonable mitigation in certain cases but employers will not be required to fund retraining through the payment of reasonable notice for employees that could have otherwise secured a similar position instead. Interestingly, participating in retraining as mitigation in cases where no comparable employment is available may be considered as “reasonable”.

Evans v. Teamsters Local Union No. 31

In the third case the employee rejected the comparable employment offer and the duty to mitigate was not met. The Supreme Court of Canada ruled that an employee has to accept alternate jobs offered by the employer as part of the duty to mitigate only if a “reasonable person would accept that opportunity”. Where a reasonable person would not return to work for the same employer then there is no need to return to the company that fired you just because it is offering a comparable job.

Re-employment with a Non-Comparable Job

There is no obligation to mitigate by taking a job that is not comparable and/or not in line with what the employees training, education and experience has prepared him for. As an easy example, a former CEO does not have to take a job at McDonalds after termination.

Employment in a comparable job position

Upon finding a new comparable job, an employee’s entitlements to reasonable notice end.

Conclusion

Employer tips:

  • Employers can reduce their potential liability by offering support to departing employees. Such measures can include career counselling, outplacement services, reference letters and notifications of comparable positions with their businesses or elsewhere. 
  • Offering positive references and making efforts to end things on good terms with employees will also reduce employer’s liability by making it easier for the employees to find a new position.
  • If the employee fails to take advantage of this assistance, the employer may be able to prove a failure to mitigate thus reducing company liability for wrongful dismissal damages.

Employee tips:

  • Employees should be aware that the onus is on them to make a reasonable efforts to seek comparable employment when dismissed.
  • Always create and keep a detailed log sheet of all efforts to find a new job. Keep dates and times listed for when you updated your resume, updated your Linked In or other social media platforms, join Indeed or Monster, saved jobs to consider, worked on cover letters. Keep a list of jobs you applied for and whether or not you got interviews. The more detail and effort included in your job  search logs the easier it will be to establish your attempts to mitigate.

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.

Termination of the Employment Relationship in Ontario

Notice and Severance under the Employment Standards Act / The Minimum Standards

The Employment Standards Act, 2000 (the “ESA”) provides the minimum standards of employment with respect to, among many other things, overtime, hours of work, minimum wages, holidays, pregnancy and parental leave, and termination of employment in Ontario.

Under the ESA, employers are required to give their employees advance notice of termination in writing or, in the alternative, pay wages and continue benefits for the statutory notice period (commonly referred to as termination pay). With respect to the termination of a single employee (as opposed to mass firings or lay-offs), the minimum length of notice depends on the length of the terminated employee’s service:

Read more