An Ontario Superior Court of Justice case from earlier in 2025 found that an executive employee who returned from a maternity leave to face a demotion and sharp pay cut was constructively dismissed, and thus had entitlements upon her termination. The law provides for protection for employees going on parental and pregnancy leaves, and employees should be aware of the recourse they have against employers who try to punish them for exercising their rights.
What notice do I need to give if I want to extend my parental leave?
If an employee gives at least four weeks’ written notice, they can extend their parental leave, though it can only be extended beyond the Employment Standards Act, 2000 limits of 63 weeks (61 weeks if the employee also took a pregnancy leave) with the consent of the employer.
Any employee who takes a pregnancy or parental leave (often referring to as ‘maternity leave or ‘mat leave’) generally has a right to be re-instated to either the same job they have before their leave, or to a comparable position, if their old job no longer exists. While such an employee can theoretically be fired upon their return, an employer will have to demonstrate that it was not discriminatory. If it was without cause, the employee will still have entitlements upon dismissal.
In the case referenced above, the employer cut the executive’s salary from $300,000 to $210,000 alongside demoting her. The employer relied on the company’s poor financial situation to justify their actions. However, the courts did not find in their favour.
If re-instatement to the same or comparable position is not possible, then it possible to seek damages for constructive dismissal. This is where even if an employee has not been formally terminated, the employer unilaterally altering a material term of the employment contract (such as through a demotion and pay cut), the employee is treated as if they were dismissed. Most employees are owed entitlements upon termination. While these entitlements under the ESA generally cap out at 34 weeks, common law entitlements can reach 24 months or even higher in exceptional cases.
When does a demotion or pay cut become constructive dismissal?
In fact, constructive dismissal does not even require an employee to be on parental or pregnancy leave. Imposing a sharp pay cut or demoting an employee can constitute constructive dismissal at any time and thus entitle the affected employee to a severance package. That said, in a situation where an employee is being ‘punished’ upon their return from pregnancy or parental leave, it bolsters the argument for constructive dismissal, and even opens the door to further, non-taxable damages for violations of the ESA, Human Rights Code, and bad faith and punitive damages.
Why is protecting parental and pregnancy leave rights so important?
Parental and pregnancy leave are crucial tools for employees to help establish work-life balance. To be able to spend time with and nurture our children in their earliest days is a right that was hard-fought for, and employees should ensure they know their employers’ obligations. No one should be punished for taking parental or pregnancy leave, including through demotions or pay cuts. Economic underperformance is no excuse to punish employees with these measures, especially after parental or pregnancy leave. An experienced employment lawyer can help explain the extent of your rights, and the best options for recourse if an employer infringes on them. If you would like to discuss further about rights to parental and pregnancy leave in Ontario workplaces, please contact Whitten & Lublin online or by phone at (416) 640-2667 today.
