What is Constructive Dismissal?
The signs of constructive dismissal are not always obvious at first. Many employees assume they may have to accept dealing with a difficult manager, workplace restructuring or what they perceive as “temporary” changes to their work or work environment. But when an employer’s actions make the work environment intolerable or significantly different from what was originally agreed upon like changing compensation, duties, or work environment without your agreement, the situation may be more serious, and you may options you didn’t realize.
In Ontario, constructive dismissal may occur when an employer unilaterally makes a significant change to a fundamental terms or condition of your employment, without your consent or allows for the creation of a hostile or toxic work environment. Given these conditions, a reasonable employee feels they have no real choice but to resign. Even though the employee technically quits, the law may treat the resignation as a termination, potentially entitling the employee to severance pay and other compensation.
Understanding the signs of constructive dismissal early is important because how an employee responds can affect their legal rights. Below are some of the most common workplace changes that may signal constructive dismissal.
TL;DR
Constructive dismissal happens when an employer significantly changes your job or creates a toxic work environment that forces you to resign. In Ontario, common signs include major pay cuts, demotions, relocation, harassment, increased workload, exclusion from projects, refusal of accommodations, and unexplained suspensions. If this happens, you may be entitled to severance pay and other compensation.
What Are the Signs of Constructive Dismissal?
If any of the following occur, you may have been constructively dismissed and could be entitled to a severance payment:
- A Significant Reduction in Pay
A major salary reduction, commission cut or removal of bonuses can be a classic sign of constructive dismissal. For example, if your compensation is decreased by 10% or more, you may be able to claim constructive dismissal.
Employers generally can’t impose substantial compensation changes without the employee’s agreement.
Even if the employer claims the changes are temporary, employees should be cautious about accepting them without legal advice.
- Your Hours Are Dramatically Reduced
A substantial reduction in hours by 10% or more can significantly affect income. This may turn into constructive dismissal.
- You Are Demoted Without Cause
A demotion involving reduced status, authority, or responsibility may qualify as constructive dismissal, even if compensation stays the same.
For example, the employee’s title is changed from Chief Operations Officer to Operations Supervisor.
- Your Job Duties Have Changed Significantly
Employees are often hired for specific responsibilities, expertise, or leadership roles. If an employer strips away core duties or assigns you substantially different work, the employment relationship may fundamentally change.
This is especially common in management and executive roles.
- Change in Work Location
A mandatory transfer to another city or province could constitute constructive dismissal if you are not in agreement with the location change. For example, you have been working at the office in Toronto for 15 years, and you are suddenly relocated to New Brunswick.
Whether the relocation is lawful may depend on the wording of the employment contract.
- A Toxic or Hostile Work Environment Develops
A toxic workplace can be one of the clearest signs of constructive dismissal.
Example include:
- Discrimination
- Bullying
- Harassment
- Sexual harassment
- Public humiliation
- Workplace retaliation
- Unjustified discipline
- Ongoing intimidation
- Failure to address complaints
Employees are entitled to a safe working environment. When an employer allows serious toxicity to continue unchecked, resignation may not truly be voluntary.
- You Are Pressured to Resign
Some employers attempt avoiding paying severance by pressuring employees to quit versus formally terminating them
This pressure can include:
- Substantial increase of workload, for example, a substantial change of work conditions make it quasi-impossible to fulfill caregiving obligations for children, elderly parents or other dependents
- Sudden increase in unrealistic deadlines
- Unrealistic performance demands
- Repeated suggestions to resign
- Sudden disciplinary action without justification
- Isolation from coworkers – for example being left out of projects or important meetings
Employees should be cautious before resigning in these situations. Its best to consult an experienced employment lawyer first before resigning.
- You are Suspended Without Legitimate Grounds
A suspension imposed without contractual authority may amount to constructive dismissal. For example, when you are put on an indefinite administrative suspension with pay or when you are suspended with or without pay in the absence of proper procedures and explanations.
In many cases, employers do not automatically have the right to suspend employees without pay unless the employment agreement specifically permits it.
- You are Refused Accommodation
If you have a health issue that requires accommodation and your employer refuses to accommodate you, this could amount to constructive dismissal. For example, you break your hip and the employer refuses to provide you with the necessary workplace conditions to fulfill your duties.
Can a Toxic Work Environment Be Constructive Dismissal?
Yes. In Ontario, a toxic or poisoned work environment can support a constructive dismissal claim where the conduct becomes serious enough that a reasonable employee could no longer continue working there.
Harassment, discrimination, retaliation, or sustained humiliation may all contribute to a poisoned workplace. Employers have legal obligations to investigate and address workplace misconduct appropriately.
What Employees Should Do Before Resigning?
One of the biggest mistakes employees make is to resign too quickly.
If you see one or more of these warning signs, you should:
- Document everything
- Keep records of emails and meeting notes
- Review your employment contract
- Record all changes to your employment
- Seek legal advice early
- Avoid emotional reactions
In some situations, continuing to work too long after major changes may be seen as your acceptance of the changes.
Are You Entitled to Severance After Constructive Dismissal?
Potentially, yes.
If constructive dismissal is established, employees may be entitled to:
- Severance pay
- Bonus compensation
- Benefits continuation
- Additional damages in some cases
Entitlements depend on factors such as age, position, years of service, compensation structure, and the terms of the employment agreement.
Conclusion
Signs of constructive dismissal may not always be obvious at first. What begins as a “temporary adjustment” or workplace tension can evolve into a serious legal issue when an employer fundamentally changes the employment relationship or creates intolerable working conditions.
Employees facing major workplace changes should be careful before resigning or agreeing to new terms. In many cases, what appears to be a resignation may legally amount to a termination entitling the employee to compensation.
Frequently Asked Questions
What qualifies as constructive dismissal in Ontario?
Constructive dismissal occurs when an employer substantially changes the terms of your employment without your consent or creates a toxic work environment that forces the employee to resign.
Can I get severance if I resign due to a toxic workplace?
Potentially, yes. If the workplace became poisoned or intolerable due to harassment, discrimination, retaliation, or other serious misconduct, the resignation may qualify as constructive dismissal. It is best to seek early legal advice in these situations.
Is a pay cut constructive dismissal?
A significant pay reduction may amount to constructive dismissal, especially if it substantially affects overall compensation and was imposed without agreement.
How long do I have to respond to constructive dismissal?
Employees should act quickly. Continuing to work too long after major workplace changes may be interpreted as accepting them.
Should I resign immediately after workplace changes?
Not necessarily. Employees should consider obtaining legal advice before resigning because resigning too quickly can sometimes affect legal claims.
Concerned About the Signs of Constructive Dismissal?
If you are experiencing one or more of these signs of constructive dismissal, it is important to understand your legal options before resigning. Constructive dismissal claims are highly fact-specific, and early legal advice can help employees protect their severance entitlements and avoid costly mistakes. Speaking to an experienced employment lawyer is imperative. Our team at Whitten & Lublin would be happy to assist.
Please contact us online or by phone at (416) 640 2667 today.
