Constructive dismissal occurs when an employer’s actions substantially breach the essential terms of the employment contract.

Tread carefully and quickly when facing such a situation, as constructive dismissals are complicated. You may have only 10 days to object. Otherwise, you may lose your right to a better termination payout if you do not act fast enough, or you may find yourself losing your job without a termination package if your claim does not meet the requirements for constructive dismissal.

What is Constructive Dismissal?

Constructive dismissal occurs when your employer’s acts and conduct repudiate the contract. This can, for example, include unilateral changes to salary, position, or duties, or creating a work environment that is intolerable due to harassment or unsafe conditions.

As explained by the Supreme Court in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, there are generally two scenarios of constructive dismissal: (i) your employer substantially breached an essential term of the employment contract, and (ii) if your employer’s conduct shows that it intended not to be bound by the contract.

Why You Should Act Fast When You’ve Been Constructively Dismissed

If you suspect you are being constructively dismissed, act immediately.

Delaying your response can lead to legal complications, including the assumption that you have agreed to any changes in your role or employment.

In Kosteckyj v Paramount Resources Ltd, 2022 ABCA 230, Paramount unilaterally announced across-the-board salary and benefit reductions as part of its corporate cost-cutting measures. Ms. Kosteckyj neither expressly rejected nor accepted the salary reduction. Without saying a word, she continued to work for three weeks following the pay reduction. The company then downsized to cut costs further, and she was fired. The Alberta Court of Appeal found that the fact she continued to work for three weeks after the reduction in pay was “indisputable evidence” that she had accepted the new terms of employment. The court ruled that an employee has 10 days to reject the proposed changes, otherwise it was implied that the changes were accepted. As a result, the termination pay she received from being fired was calculated based on her newly reduced salary. At the end of the day, her failure to signal her rejection of the lower salary meant that her termination package was $10,000 less than it would have been if she had expressed disagreement with the pay changes.  A simple failure to act cost her significantly.

First Steps When You’ve Been Constructively Dismissed

There are two key actions you need to take right away:

1. Express your disagreement: You must let your employer know (preferably in writing) that you do not accept the changes. If you do not make your disagreement clear, the court could interpret your continued employment as consent to the new terms, potentially destroying your case.
2. Consult a lawyer: Constructive dismissal cases are complicated and require expert legal advice to navigate. From understanding the allegations of harassment to determining whether changes to your job are substantial enough to constitute a breach, a lawyer will guide you through the process.

Here are two key things you should avoid.

1. Don’t accept new terms: Never agree (in writing or verbally) to the new terms your employer offers if you feel they amount to constructive dismissal. Accepting the new terms, may undermine your claim.
2. Don’t resign hastily: If you resign without understanding your legal rights, you risk losing severance and even unemployment benefits.

Why You Should Act Cautiously

Constructive dismissal claims are often complex and fraught with pitfalls. Below are some key considerations to be cautious of before making a claim.

Constructive Dismissal Is Not Easy to Establish

Not every change to your employment terms will qualify as constructive dismissal. The court will also try to understand the changes in a broader context.

For example, in Boyer v. Callidus, 2024 ONSC 20, (upheld by the Court of Appeal in Boyer v. Callidus Capital Corporation, 2025 ONCA 79, the employee did not appeal), the employee, Mr. Boyer, sued the employer, Callidus, for constructive dismissal, in the face of his planned retirement, due to the reduction of his responsibilities and the company’s toxic work environment. The court found that Mr. Boyer was not constructively dismissed; instead, he had voluntarily resigned.

The court found that, although Callidus transferred Mr. Boyer’s responsibilities before his retirement date, it was understandable, as the transition should have been done before he retired, so it was not constructive dismissal.

Mr. Boyer also alleged that he was constructively dismissed due to conduct by Callidus, including unjustified criticism and vague, unfounded allegations against him, as well as Callidus creating a hostile and embarrassing work environment.

However, the court found that although Mr. Glassman’s criticisms of Mr. Boyer may have been unjustified, and his language was harsh, it did not amount to constructive dismissal. The physical attack incident was not directed at Mr. Boyer, so this unfortunate incident that Mr. Boyer witnessed did not render his continued employment at Callidus intolerable, thereby amounting to constructive dismissal.

As a result, the motion judge found Mr. Boyer was not constructively dismissed, but had resigned, thereby rejecting his claim for pay in lieu of common law reasonable notice.

For constructive dismissal to be valid due to a toxic environment, the employer must have behaved in a manner that renders continued employment intolerable, a high standard.

 

The Termination Clause in Your Contract May Still Apply

Even if you are constructively dismissed, a termination clause in your contract may still limit your entitlement.

In Moore v. Apollo Health & Beauty Care, 2017 ONCA 383, the Court of Appeal upheld the trial judge’s part of the decision that the termination clause was still enforceable despite a finding of constructive dismissal.  The trial judge found that Apollo constructively dismissed Ms. Moore by changing her responsibility from that of a non-supervisory line technician to a line supervisor. However, the following termination clause was still enforceable:

If Apollo terminates your employment, you shall be entitled to receive only such notice of termination, termination pay, benefit continuation and/or severance pay, if any, as are required by the [Employment Standards Act, 2000] in the circumstances of the termination. This paragraph defines and limits your full entitlement to notice of termination, pay in lieu of notice, benefit continuation and severance pay upon termination of employment, and shall apply regardless of any changes to the terms and conditions of your employment (including changes in position, duties and responsibilities, reporting relationships, and compensation). Please read it carefully.

[emphasis added]

The Court of Appeal found that the terms of the above clause specifically address the calculation of notice upon constructive dismissal. As such, the termination clause was enforceable. As a result, the employee was not entitled to common law notice or pay in lieu of such notice.

Why does it matter? It matters because the termination clause may significantly reduce your termination entitlement, potentially rendering the constructive claim unworthy of pursuit under certain circumstances, compared to continuing to work. For example, a non-managerial employee who has worked for 3 years may be entitled to about 3 months’ reasonable notice or pay in lieu of notice. However, if the termination clause is enforceable, they may receive only 3 weeks’ notice or pay in lieu of such notice, significantly reducing the amount they may receive due to constructive dismissal.

You Have a Duty to Mitigate Your Loss

Employees claiming constructive dismissal must actively attempt to mitigate their losses by seeking new employment. This means that if it is reasonable for the employee to continue working to reduce their income loss due to constructive dismissal, they should do so, especially when constructive dismissal is due to business needs. As explained by the Supreme Court in Evans v. Teamsters Local Union No. 31, 2008 SCC 20.

Therefore, even if an employee successfully establishes constructive dismissal, but fails to mitigate their loss by continuing with the new position with the same employer (if that’s reasonable to do), they may not be awarded damages in the end.

Final Considerations if You Have Been Constructively Dismissed

Constructive dismissal claims can be complex, and the outcome often depends on specific facts and nuances. To protect your rights:

• Act quickly: Express your disagreement to avoid being deemed to have acquiesced.
• Consult a lawyer: Legal guidance is essential to navigate the complicated details.
• Avoid rash decisions: Don’t accept new terms or resign without fully understanding your legal position.

Legal professionals are crucial to help you assess whether you have a valid claim and to avoid making mistakes that could harm your case.

By taking the right steps, you can protect your interests and pursue the best course of action if you’ve been constructively dismissed.