Constructive Dismissal Pitfalls in Employment Law: Five Key Factors for Employers

Constructive dismissal risk continues to be a key concern for Canadian employers, particularly in the context of operational changes. Courts treat a constructive dismissal as a dismissal without cause when an employer’s actions demonstrate an intention not to be bound by the employment contract.

The following represents five key factors that are commonly found in constructive dismissal claims:

1. Compensation Changes. Courts treat compensation as a fundamental term of employment. Significant unilateral pay cuts or other significant changes to compensation or material benefits can present high constructive dismissal risk. Even smaller changes to compensation can lead to constructive dismissal risk, particularly if accompanied by other changes to the terms of employment.
2. Changes to Job Duties. Employers may make reasonable adjustments to job duties, but significant changes, particularly those involving demotions, can constitute constructive dismissal.
3. Poisoned Workplaces. Constructive dismissal may arise from a poisoned workplace caused by persistent discrimination, harassment or demeaning treatment of an employee in the workplace that is not properly dealt with by the employer. Courts apply an objective test to assess whether a reasonable person would find the workplace intolerable.
4. Changes to Title or Reporting Structure. Most often, a change in title or reporting structure alone will be insufficient to constitute constructive dismissal. However, when dealing with senior-level employees, such changes can trigger claims, particularly if they are perceived to result in a significant loss of prestige and status.
5. Relocation. While reasonable relocations are permitted, unilateral and material relocations can constitute constructive dismissal in certain cases. This may include moving from a remote work model to an in-office model, where remote work is a fundamental term of the contract of employment.

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