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.

If you consider that you are working full-time for this one “employer”, then in all likelihood, you are not an independent contractor. If this employer has fired you, and claims you are not entitled to notice of termination or any pay in lieu of notice, or offers a small amount in return for a release, the good news is that there is a lot you can do.

Rather than walk away empty-handed, understand your rights. Start by consulting an experienced employment lawyer, who can help you understand whether you are an employee or perhaps a dependent contractor, entitled to termination notice or termination pay in lieu of such notice. There is a good chance that you are entitled to significant termination pay.

Below is an overview of why you might be owed significant termination pay.

What the Law Says

Under common law, independent contractors are not entitled to notice of termination or pay in lieu of notice, unless their contract explicitly provides for it.

However, courts and tribunals have recognized that some individuals labelled as “independent contractors” are actually employees or dependent contractors, both of whom are generally entitled to notice of termination or pay in lieu under common law, unless a valid contractual clause provides otherwise.

Three Legal Categories of Workers

As explained in Keenan v. Canac Kitchens Ltd., 2015 ONSC 1055, (“Keenan”, affirmed by Ontario’s Court of Appeal, 2016 ONCA 79) at paragraph 17, “[e]mployment relationships exist on a continuum; with the employer/employee relationship, at one end of the continuum, and independent contractors at the other end. Between those two points, lies a third intermediate category of relationship, now termed dependant contractors.”

Employees are fully protected by and entitled to minimum entitlements on termination under employment standards legislation (“ESL”) and may be entitled to reasonable notice under the common law. Dependent contractors are contractors who are economically dependent on a single client. They are generally entitled to reasonable notice upon termination.  True independent contractors are self-employed, with multiple clients and significant control over their work. They are not entitled to termination notice unless specified in their contract.

As confirmed by Ontario’s Court of Appeal in McKee v. Reid’s Heritage Homes Ltd., 2009 ONCA 916, the first issue is whether a worker is an employee or contractor.  If the worker is a contractor, the court will then consider whether the worker is a dependent contractor or an independent contractor.

Employee v Contractor

In 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59, the Supreme Court explained how to tell if someone is an employee or an independent contractor. The main question is whether the person is running their own business or working for someone else. Although there is no universal test, the following factors are usually considered:

• how much control the employer has over the worker’s activities,
• whether the worker uses their own equipment,
• if the worker hires help,
• how much financial risk the worker takes,
• how much responsibility the work has for investment and management, and
• what the opportunity the worker has for profit in the performance of their tasks.

Dependent v Independent Contractor

As examined in Keenan, the court will usually consider the following principles to determine if a worker is a dependent or independent contractor:

• Exclusivity of the relationship (do you work only for one company?).
• Degree of control the company has over your work.
• Ownership of tools or equipment (do you provide your own?).
• Opportunity for profit and risk of loss (can you make a profit or suffer a loss?)
• Ownership of the business. (Whose business is it?)

To be considered a dependent contractor, exclusivity does not have to be completely exclusive at all times. In affirming Keenan, the Court of Appeal explained that the court will look at the full history of the relationship, rather than a point in time, to decide whether the worker was economically dependent on the company, due to exclusivity or a high level of exclusivity. In Keenan, although the workers worked for the hirer’s competitor during the last two years of the relationship due to a slowdown in the hirer’s work, the court still found them to be dependent contractors, as more than 90% of their income came from the hirer and they worked exclusively for the hirer for more than 20 years.

If you have recently received a Performance Improvement Plan (“PIP”) and are feeling uncertain about your next steps, you’re not alone. You may feel blindsided, especially if you have not been told that your performance is a problem: Is this a genuine attempt to help me improve, or is it a step toward termination?

Do not let confusion and anxiety overwhelm you. Gain clarity on what a PIP truly means, explore your options for improvement, and learn how to respond to the PIP. Understanding your situation can empower you to make informed decisions about your career.

What You Should Know About Your PIP?

In theory, a PIP is a tool used by employers to help an employee correct performance issues through clear expectations, measurable goals, and constructive feedback. It is meant to be part of a good-faith effort to support improvement on specific performance issues.

However, that is not always how it plays out in practice. Some employers use PIPs as a strategic way to build a paper trail to justify letting an employee go “with cause”.

Here are some of the red flags that your PIP may be more about protecting your employer than genuinely helping you succeed:

• You were never given feedback or warnings about your performance before the PIP.
• The goals are vague, unrealistic, or impossible to meet within the timeline provided.
• You were not provided with or were denied any resources or assistance to improve the performance issues alleged by the employer.
• You are being micromanaged or excluded from meetings you used to attend.

If any of these apply to you, the PIP may be part of a plan to manufacture cause for dismissal or to push you to resign.

A PIP May Be A Cover-up for Your Termination And You May Get Additional Compensation

Some employers use PIPs as a cover for their intent to terminate. They think that if the PIP fails, they may be able to justify a “cause” termination, or pressure you into quitting, to avoid paying you what you are owed – your notice of termination or pay in lieu of notice.

However, in Ontario, employers must meet a high legal threshold to terminate someone “for cause” without paying reasonable notice under common law. A single poor performance review or PIP is almost never enough. To prove cause, the employer must show serious and repeated subpar performance and that the employee was given a reasonable opportunity to improve.

In some cases, a bad-faith PIP, especially if combined with other mistreatment (such as public shaming), can justify a constructive dismissal claim. That means your employer has essentially terminated you through their conduct, even if they have not said the words.

Sometimes, an employee may be awarded additional damages due to their employer’s bad-faith implementation of PIP. In a 2010 Ontario case, an employee was awarded $45,000 for their employer’s manner of termination, including the failure to carry out the PIP in good faith.

How to Protect Yourself

If you have been put on a PIP, here is what you can do:

Document Everything

Signing a PIP to acknowledge receipt does not mean you agree with it. Clearly state in writing (email is fine) if you dispute the allegations, timelines, or process. This protects your position later if legal action is necessary.

Additionally, save emails, meeting notes, and any correspondence related to your performance.

Speak to a Lawyer

If you have been put on a PIP, a lawyer can help you:

• Respond to the PIP in writing.
• Negotiate a severance package if you’re being pushed out.
• Assess whether the PIP process amounts to constructive dismissal.
• Assess whether you are entitled to additional compensation due to how your employer implemented the PIP.

Next Steps

While your employer may be acting in good faith with the intent to help you, if it feels off or if it comes as a surprise that may not be the case. Remember, your employer cannot get rid of you without consequences.

If you have received a PIP and feel it is being used unfairly, especially if it came out of nowhere or seems designed for you to fail, do not wait until you are dismissed. Speak with an employment lawyer right away. You may be entitled to a severance package, and in some cases, additional damages.

Being terminated from your job is stressful, and receiving a letter that you have been fired “for cause” can add additional anxiety and depression. While these emotions are understandable, it is essential not to let them prevent you from taking proactive steps to understand your rights.

Was it really a “for cause” termination?

In Ontario, there are two types of situations commonly called a “for cause” termination:

1. “Wilful misconduct” under the Employment Standards Act, 2000 (“ESA”)
2. Just Cause under the common law

The employer needs to be able to justify either of these types of termination.  If not, then you might be entitled to reasonable notice of termination, or pay in lieu, under the common law.

If you have been fired for cause, it’s important that you do not sign anything without getting legal advice as these claims are often without merit and can be reversed. You could walk away with a much higher severance payout.

“Wilful misconduct” under the Employment Standards Act, 2000 (“ESA”)

Under the ESA, if you have been employed for 3 months or more, an employer can terminate you without notice or pay in lieu if  “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”

This is a very high threshold.  However, if the employer can make a case for wilful misconduct as described, then you would not be entitled to any termination or severance entitlements under the ESA or under the common law.

“Just Cause” or “For Cause” under common law

Although the employer might not have been able to show that you engaged in wilful misconduct meeting the requirements of the ESA, a case for just cause under the common law might still be made out.  If so, you would still be entitled to your termination and severance pay under the ESA, although not reasonable notice under the common law.

What is the difference?

The distinction between “wilful misconduct” and “just cause” was discussed in Render v. ThyssenKrupp Elevator (Canada) Limited.  The Ontario Court of Appeal held that a single incident of slapping a colleague’s buttocks did not meet the criteria for wilful misconduct under the ESA, but it did meet the threshold for common law just cause.  The employee was given no notice or pay in lieu on termination, but the court awarded him his ESA termination and severance entitlements.

In order not pay anything at all, the employer must prove wilful misconduct under the ESA.  That means not only showing that the conduct was serious but there must also be “an assessment of subjective intent, almost akin to a special intent in criminal law” to engage in the misconduct.

For common law just cause, the core question is “whether an employee has engaged in misconduct that is incompatible with the fundamental terms of the employment relationship” (Dowling v. Ontario (Workplace Safety and Insurance Board), “Dowling”). This generally means that your employer must be able to show severe or repeated misconduct or deficiencies on your part that fundamentally break the employment relationship.

Dowling set out a three-step test for common law just cause, which was affirmed by Ontario’s Court of Appeal in  Hucsko v. A.O. Smith Enterprises Limited:

1. Determine the nature and extent of the misconduct;
2. Consider the surrounding circumstances; and
3. Decide whether the termination for cause was warranted (i.e. whether termination is a proportional response to the misconduct alleged).

Grounds such as incompetence, insubordination, theft or misappropriation, dishonesty, harassment, or workplace violence may potentially constitute wilful misconduct or just cause for termination.   However, courts have also considered the context of the alleged conduct. For instance, in Shakur v. Mitchell Plastics, a single isolated act of violence in the workplace was not enough to justify a just cause termination since the employee otherwise had a clean disciplinary record and the incident was relatively minor in nature.

Next Steps

If your employer has terminated your employment allegedly for “cause,” do not accept this decision at face value without seeking legal advice.

If your employer fails to substantiate either wilful misconduct under the ESA or common law cause, your termination should be treated on a “without cause” basis. In this situation, you would be entitled to your contractual termination entitlements, provided you have an employment contract with an enforceable termination clause. If there is  no written contract with an enforceable termination clause, you are likely entitled to common law reasonable notice. How much you are owed would be based on various factors, including age, how long you have been employed, your position.   Depending on the factors, and where there are special circumstances, this could be up to 30 months’ compensation!

In our experience, firings for cause often do not withstand legal scrutiny, and in many cases, we have successfully challenged such dismissals and removed the “for cause” designation. If you are terminated “for cause”, don’t wait – seek legal advice as soon as possible to protect your rights and secure the fair compensation you deserve.

Are you being called back to work in the office after working remotely? You’re not alone. Although there has been a transformation in the workplace in recent years, many employers, citing productivity issues, call remote employees back to the office either full-time or on a hybrid basis. This leads employees to question whether employers can legally force a return back into the office. The even bigger question is what will happen if you refuse to return.

Contact an Employment lawyer before responding to the request.

Under certain circumstances, you may refuse to be called back to the office; if the employer insists, calling you back to the office without your consent may enable you to claim constructive dismissal and ask for termination pay.

However, if your employer does have the right to call you back, your refusal may lead to disciplinary action or even be deemed resignation without any entitlements to compensation. The stakes could not be higher.

Your employer may not be able to recall you to end your remote working arrangement unless (i) such recall right has been clearly and timely communicated, (ii) reasonable notice has been provided to you regarding incorporating such recall right into the terms of your employment, or (iii) remote working is not a fundamental term of your contract.

Speaking to an employment law expert to fully understand your rights is incredibly important. Below are several considerations to get you started in the process.

Contractual rights

Depending on the contract, employers may include the right, orally or in writing, to unilaterally recall remote workers back into the office and end the remote working arrangement. If they do have such a right, refusing to be called back could lead to disciplinary action, including potential termination for cause. If they do not, employers have to give reasonable notice for the change. However, if an employee refuses to return to the office in this scenario, it may lead to constructive dismissal and the right to wrongful dismissal damages.

As the Supreme Court explained in Farber v Royal Trust Co., [1997] 1 S.C.R. 846, constructive dismissal occurs when an employer unilaterally and fundamentally changes a term of an employment contract without providing reasonable notice of that change. The employee can treat the contract as wrongfully terminated, which, in turn, obliges the employer to pay damages in lieu of reasonable notice.

As such, whether ending remote work amounts to constructive dismissal depends on whether remote work is a fundamental employment contract term. Short of a written agreement precisely on this point, the answer will be case-by-case.

What do the courts say?

A recent case in the Ontario Superior Court of Justice, Small Claims Court, addressed this issue. In Byrd v Welcome Home Children’s Residence Inc., 2024 CarswellOnt 21744 (“Byrd”), the employee worked on-site at the employer’s care home. However, as the Canadian Forces had posted the employee’s husband to Europe, the employer allowed the employee to work remotely beginning in 2020. The husband’s posting was supposed to end on July 23, 2023.  There was no written agreement detailing this arrangement, nor did the employer specify that it retained the right to ask her to return physically to work. Initially, there were no issues with the employee’s remote work. However, on March 10, 2022, the employer required the employee to immediately return to the workplace physically or resign, although her husband was still posted abroad. The employee resigned and sued the employer for constructive dismissal.

Deputy Judge Kelly found that the employer, in requiring an immediate return to the workplace, without first giving reasonable notice of the end of the remote work arrangement, had constructively dismissed the employee.  Since the employer had remained silent for about 20 months after the employee’s move to Europe, the judge found that the remote work had become a term of her employment, and that clear and timely notice of the recall to working in the office was required. The employee was found to be entitled to wrongful dismissal damages equivalent to 6.5 months of pay.

The case provides guidance on the analysis of rights and obligations in the remote work environment. However, unlike decisions of the Superior Court of Justice, decisions of the Small Claims Court are not required to be followed as precedent, though the decisions may be persuasive.  Also, some special facts drove the judge’s finding that the remote work had become a fundamental term of employment. For example, when making the remote working arrangement, the employer was aware that the employee’s husband’s foreign posting was for a fixed period, not permanently, and so was the remote working arrangement.

This is different from another BC case referred in Byrd, Staley v. Squirrel Systems of Canada Ltd., 2013 BCCA 201 (“Staley”), a case decided before remote work became prevalent, but still relevant today.  In Staley, the BC Court of Appeal upheld the trial judge’s decision that the employer was entitled to call the employee back to the office, and they had just cause to dismiss the employee. The employee’s refusal to return to the Vancouver office was found to be “an act of willful disobedience and insubordination in relation to his employer’s order” to return to work.

The judge in Byrd distinguished Staley on the following factual grounds: in Staley, the employee moved with their spouse from Vancouver to Montreal permanently; although the employer initially allowed the employee to work remotely, within a month of remote working, the employer confirmed in writing that his permission to work remotely was temporary; within 3 months, the employer presented the employee with a new employment contract, providing that the employer could recall him from remote working to Vancouver office at any time; when the employee refused to sign the contract, he was ordered back to Vancouver; when he did not return, he was terminated without further notice or payment in lieu of notice.

In contrast to Byrd, where the employer said nothing about it until approximately 20 months after the employee’s move to Europe there was clear and timely notice in Staley.

What does this mean for you?

As such, the key to deciding whether your employer has the right to recall you to the office will depend on the following:

1. Whether remote working is a fundamental term of the employment contract;
2. Whether there is an agreement regarding your employer’s right of recall; and
3. Whether your employer has communicated such a right with clear and timely notice.

Without the above, your employer’s recall back to the office may result in constructive dismissal and termination pay.

That said, even without such a recall right, your employer may still be able to incorporate it by giving you reasonable notice.

To sum up, this can be a high stake situation, and the actual situation can be more delicate than the above scenarios and potentially involve termination of employment. It is advisable to consult with a legal professional before proceeding.

As a result of the ongoing tariff war, many employees are left with employment uncertainty. It is important for all employees to understand your rights in economic uncertainty and what protections are in place.  With the ever-shifting tariff rates on steel and aluminium, and on Canadian automobiles, the auto sector and related industries, and the over 500,000 Canadians whose livelihoods depend on it nationwide, is under special threat.

However, there are certain considerations and protections for automotive workers during this time.

Understanding Layoffs vs. Terminations

In response to the challenges, employers may consider two primary approaches to managing costs:

• Temporary Layoffs: Temporary suspensions or reduction of work or hours, with the expectation of recalling employees within a certain timeframe.
• Terminations: Permanent stoppage of the employment relationship.

If you work in the automobile industry, it is crucial for you to understand your rights and entitlements under each scenario.

Unionized Workers: Rights Under Collective Agreements

If you are a unionized worker in Ontario’s automobile manufacturing sector, you are covered by a collective agreement. These agreements generally outline specific provisions regarding layoffs and terminations. Engage with your union representatives to ensure all entitlements laid out in the collective agreement are received.

Non-Unionized Employees: Temporary Layoffs

If you are a non-union employee facing a temporary layoff, it is essential to consider the following:

1. Employer’s Right to Layoff: Employers must have a contractual right to impose temporary layoffs. Without an explicit clause in the employment contract permitting such action, a layoff could be deemed a constructive dismissal, entitling you to termination entitlements.
2. Duration of Layoff: The Employment Standards Act, 2000 (“ESA”) specifies maximum durations for temporary layoffs. Exceeding these durations without proper recall may result in the layoff being considered a termination.
3. Recall Rights: You should be informed about your rights upon returning to work. Significant changes to the terms of employment upon recall could also be considered constructive dismissal.

Non-Unionized Employees: Terminations

If you are terminated, review your employment contract to see if there are enforceable termination clauses. Without a proper termination clause, you are entitled to reasonable notice, which can be much more than the minimum standards set by the ESA. It is also important to consult a lawyer before signing any severance documents.

Mass Terminations: Special Rules Under the ESA

There are special considerations if an employer in the automobile industry terminates 50 or more employees at a single establishment within a four-week period. These special rules generally provide greater entitlements than those in regular termination cases, even if your contract includes enforceable termination clauses.

The notice period in the event of a mass termination does not depend on tenure but rather on the total number of employees being let go:

• 8 weeks if terminating 50 -199 employees;
• 12 weeks if terminating 200 – 499 employees;
• 16 weeks if terminating 500 or more employees.

However, these special rules do not apply in the following situations:

• If the terminations involve 10% or less of the employees who have been working at that establishment for at least three months;
• If the terminations are not caused by the permanent closure of part or all of the business at the establishment.

Final Thoughts

U.S. tariffs present significant challenges for workers in Ontario’s automotive sector. Whether unionized or non-unionized, you need to understand your rights and the legal frameworks surrounding layoffs and terminations. Engaging with union representatives or seeking legal counsel can provide clarity and ensure that you receive your legal entitlements.

It isn’t uncommon for employment to change over time.  You may have received a promotion, or your employer has gone through a restructuring process, or even the nature of the overall business has undergone significant changes, and your role has changed to reflect that. For clarity, most employers will provide a new employment contract outlining any significant new role along with any changes in the employment relationship. A new contract may also be offered even if your role does not change.  If any of this happens, before you sign on the dotted line, it is important to pause, carefully review the document, and ensure you fully understand what you agree to. Here is why.

What if the Contract is Different From What Was Promised?

Whether the new employment contract was expected or not, you might notice discrepancies between what is written in your employment contract and what was verbally represented to you would be your new role or if there is no new role, what your current role entails. If this happens, do not sign immediately. Instead, respectfully but clearly communicate your concerns to the employer. Ask why the terms differ and request adjustments to reflect the initial promises made to you or what reflects your current role.

It is important to note that if your employer made promises in writing (such as via email or text), those communications might legally form part of your contract. A recent BC case, Sui v. HungryPanda Tech Ltd., confirms that email exchanges, under certain circumstances, can actually become legally binding terms of employment.

Did You Receive Consideration for Your Contract Renewal?

Your employer might ask you to sign a new employment contract, replacing your previous agreement. Legally, for a new contract or its terms to be enforceable, “fresh consideration” – something new of value, such as a promotion with a raise, or a bonus for signing this contract, even enhanced benefits, or additional vacation days – must be provided to you in exchange for agreeing to the updated terms. Without fresh consideration, the new contract is not binding on you.

In June 2024, the Court of Appeal confirmed in Giacomodonato v. PearTree Securities Inc. that fresh consideration was required for the new employment contract given to an existing employee. As such, you should ensure that you receive fresh consideration for a new contract, especially if the new contract contains terms that take away rights you have under the old contract.

Do You Fully Understand the Terms of Your Contract?

a. Termination Clause

The termination clause defines what you will receive if your employment is terminated, and sometimes these termination clauses will limit your entitlement to the minimums allowed under employment standards legislation, such as the Employment Standards Act, 2000 (“ESA”) in Ontario.  Adding such a termination clause is often the reason that your employer might ask you to sign a new contract, even if there is no change to your role.  If enforceable, it will limit your termination entitlements to what it provides. Without a termination clause—or if the clause is unenforceable—you are entitled to common law reasonable notice, often significantly more generous than ESA minimums. Understanding this distinction is critical, as it can substantially impact your financial security if your employment is terminated unexpectedly.

b. Compensation and Benefits

In addition to salary (wages), there might be contractual benefits such as group benefits, bonuses, stock options, RSUs, etc. Understand how these benefits are calculated and how often they are paid out.

According to Matthews v. Ocean Nutrition Canada Ltd., confirmed by the Supreme Court of Canada in 2020, if you are terminated without just cause, you are entitled to compensation equivalent to what you would have earned during the reasonable notice period, including your contractual benefits, unless there is language directly excluding that entitlement.

Therefore, pay particular attention to any “exclusion clauses” that might explicitly state that specific benefits or compensation elements, like bonuses or equity incentives, are excluded from your termination entitlements. This could significantly affect your severance package if your employment is terminated.

c. Restrictive Covenants

Restrictive covenants generally include confidentiality agreements, non-competition clauses, and non-solicitation agreements.

• Confidentiality: Usually, confidentiality clauses are required to protect the employer’s sensitive information and prohibit disclosure, except with the employer’s permission or as required by law.
• Non-competition: Non-competition clauses limit your ability to work for competitors, typically within a defined time and geographic area. However, in Ontario, non-competition clauses entered into after October 25, 2021, are no longer enforceable under the ESA, with the two exceptions for executives and the sellers of businesses.
• Non-solicitation: Non-solicitation clauses prohibit you from soliciting the clients or employees of your former employer for your own benefit or the benefit of someone else.  To be enforceable, these clauses must have a reasonable definite duration.

Consult a lawyer to fully understand these provisions, ensuring you do not inadvertently agree to overly restrictive terms that might hinder your future career opportunities.

Final Thoughts

Receiving a new employment contract can provide clarity in your role at a company, but it can also create questions. Do not rush into signing without fully understanding its terms. If you are uncertain about any aspect, seeking legal advice can clarify your obligations and rights.

The threat of sweeping tariffs on Canadian goods has resurfaced, with significant implications for Ontario’s economy and workforce. Ontario Premier Doug Ford estimates that the tariffs proposed by the Trump administration could impact up to 500,000 jobs in the province, making this an urgent concern for affected employees. If you have been put on a temporary lay off or foresee a temporary layoff as a result of these tariffs, below is what you should know.

Is Your Company Allowed to Lay You Off?

When an employer puts employees on layoffs due to external factors like tariffs, it does not automatically grant them the right to do so. Under the law, unless a specific employment agreement allows for temporary layoffs, employers generally do not have the authority to implement them. As stated by the Ontario Superior Court in Webb v. SDT North America, 2023 ONSC 7170, “It is well established that an employer has no right to unilaterally lay off an employee unless the contract provides otherwise.”

Putting employees on temporary layoffs without a valid layoff clause in the employment contract are seen as a fundamental change to the employment. This change can be viewed as constructive dismissal, which may qualify you for wrongful dismissal damages.

How Long Is Your Layoff?

Even if your employer has the contractual right to temporarily lay you off, under Ontario’s Employment Standards Act, 2000 (“ESA”), they can only do so on a temporary basis. Generally, in the non-unionized context, a temporary layoff can last no longer than 13 weeks within any 20 consecutive weeks or no longer than 35 weeks within any 52 consecutive weeks, provided certain conditions are met (for example, the employer must continue your benefits during the temporary layoff).

Usually, employers would indicate the length of the temporary layoff and include the date of return in the notice of layoff. If the time limit is exceeded, the layoff will automatically result in termination, triggering the employer’s obligation to provide termination entitlements. In this case, the first day of layoff is considered the termination date.

What If You Are Being Recalled?

Some companies may offer to recall employees after the constructive dismissals arising from overlong layoffs. In such cases, employees might wonder whether they should claim constructive dismissal because the position is so different, or accept the recall offer to fulfill their duty of mitigation.

Under common law, the duty of mitigation means that employees should mitigate the damages resulting from dismissal by making reasonable efforts to seek re-employment and by accepting comparable employment.  Generally speaking, “comparable employment” refers to positions that are similar in status, hours, and pay.

The Supreme Court of Canada, in Evans v. Teamsters Local Union No. 31, 2008 SCC 20, stated that employees are only required to accept recall offers that a reasonable person would not find embarrassing, humiliating, and/or degrading to return to work. Specifically, employees should return only if the pay is the same, the working conditions are similar, and the work is not degrading. The court will also consider other factors, such as the employee’s job history and whether they have initiated legal action.

In Michalski v Cima Canada Inc., 2016 ONSC 1925, the court ruled that the employee should have taken the recall offer, which he did not. As a result, his common law entitlement was capped at the date of the recall notice. However, each situation is unique and should be assessed in its entirety. Before making a decision to return, you should consult an experienced lawyer.

Do You Know the Limitation Period?

Generally, there is a two-year limitation period for pursuing constructive dismissal claims. While exceptions have been made in extraordinary circumstances, waiting too long to act could mean forfeiting your right to legal recourse.

It is also worth noting that the longer you remain on layoff without objection, the stronger your employer’s argument becomes that you accepted the layoff as a condition of your employment.

What to Do When You Are Laid Off?

If you are laid off due to U.S. tariffs, it is important to consult an employment lawyer promptly to explore your options. If your layoff is not supported by an enforceable contract or if it exceeds the timeframes defined by the ESA, your employment may already be considered terminated. Taking action now can help protect your rights, secure the compensation you deserve, and prevent any assumption that you have accepted the layoff. When your company recalls you, carefully assess whether you should accept the recall offer and return to work.

Employment disputes often carry emotional weight, particularly for employees facing allegations of termination for cause, harassment, or unfair treatment. Understandably, individuals may feel stressed, perceive unfairness, and seek retribution against their employers.

However, the law expects parties to act reasonably in resolving their differences. Doing so saves legal costs and judicial resources, aligning with sound public policy.  Judges take the reasonableness of the parties into consideration when crafting their decisions, particularly on costs.

Acting reasonably entails making legally and factually viable claims, seeking remedies supported by law, and being open to concessions for settlement. Failing to do so carries significant risks and costs, as shown in these cases:

Escalating Legal Expenses and Costs Award

Pressing baseless claims or demanding unrealistic remedies can lead to mounting legal expenses and potential cost awards. While playing hardball may occasionally yield results, it typically favours employers. This approach prolongs negotiations, delaying payments and causing mental and financial strain on employees, especially if they are unemployed and must bear legal costs upfront. Moreover, courts may refuse to award costs in favour of or even against the parties acting unreasonably or refusing better settlement offers than those proposed at trial. Consequently, employees’ legal costs increase, diminishing their net gain.

For example, in Chin v. Beauty Express Canada Inc., 2023 ONSC 56, the employee won her case against the employer and was awarded wrongful dismissal damages of about $16,000.  The employee incurred $55,000 in legal fees. Ordinarily, some of those legal fees would be recovered through a costs award, as he had won the case.  However, even though the employee won the case and bettered the employer’s pre-trial offer to settle of $10,000, the court refused to award costs in her favour. The judge remarked that the trial was “an unfortunate waste of the parties’ resources”, “the Plaintiff’s pursuit of the extensive claim, …, appears to have been more a product of emotion than reason”, and “[h]ad the Plaintiff been more realistic in assessing the merits of the case, that controversy could have, and should have, been resolved in a far more efficient Small Claims Court hearing.”  The employee netted a loss of $40,000 for being unrealistic in pursuing her extensive claim, driven by emotion rather than reason.

In another example, the court even ordered costs against the employee, although the court supported some of the employee’s claims and ordered moral damages against the employer. In Colistro v. Tbaytel, 2019 ONCA 197, the Court of Appeal refused to review a trial court’s cost award against this employee.  At trial, the employee claimed damages for constructive dismissal and intentional infliction of mental suffering for over $3,000,000. The trial judge found that she was entitled to damages equal to pay in lieu of 12 months’ notice, less the short-term salary continuance and long-term disability benefits she had received over that period, leaving a net award of $14,082, plus moral damages of $100,000, and prejudgment interest.  Since the result was much lower than the employee’s original claim of over $3,000,000, the trial court held that the employer was substantially successful in the litigation and ordered the employee to pay $200,000 in costs to the employer, leaving her with a net loss of about $85,000, plus the legal costs she might have also incurred herself.

Lengthy Litigation and Diminished Damages

Another significant risk employees face is that they have an obligation to mitigate wrongful dismissal damages by looking for and accepting comparable positions. Otherwise, they are at risk of having any wrongful dismissal damages reduced for failing to mitigate their loss. Employment income during the common law notice period could also be deducted from the overall entitlement.

As such, the longer employees wait, the higher the chance they’ll find a job they should or will accept. Once they take the job, their overall termination entitlements may be significantly reduced. We have seen situations where once the employee accepts a job offer, the employer pulls their existing offer from the table and offers much less instead. The employee is worse off due to not agreeing to the offer sooner.

Vulnerability to Legal Developments

Developments in the law can also turn what was a reasonable claim into an unreasonable one.

For instance, consider the legal positions taken surrounding COVID-19-related employment disputes. Many employees in non-unionized workplaces were put on leave or terminated due to their refusal to follow vaccine mandates, and they asserted constructive dismissal and wrongful dismissal claims.  Employers often settled these claims as the law was unclear whether such claims in a non-unionized workplace were viable, particularly if they were risk-averse.  The situation has changed significantly since the emergence of two cases in non-unionized workplaces:  (i) in Parmar v Tribe Management Inc., 2022 BCSC 1675, the court ruled that putting employees on unpaid administrative leave for refusing to follow vaccine mandates is not constructive dismissal; and (ii) in Croke v. VuPoint Systems Ltd., 2023 ONSC 1234, the court found that refusal to follow vaccine mandates could amount to the frustration of employment contracts.  As his employment had been frustrated, he was not entitled to any additional damages for wrongful termination.

The assertion of claims is always subject to developments in the law, and consulting with counsel will help to clarify any risks.

Takeaways

Comparatively, employees are not in a good position to play hardball with employers. With fewer resources, lengthy legal disputes and high legal costs pose a greater risk. That being said, here are some key takeaways for employees entering a legal dispute with their employer:

• Employees are obliged to, and many are eager to find a job, which will only reduce the potential of damages awarded. It is important to retain legal counsel early in the dispute to ensure all offers are fair and to act quickly.
• Employment laws are constantly changing, and case law can dictate how the courts act in certain situations. Employees should be aware of their rights and understand how to mitigate the risk of changing laws when this happens.
• Employees do not have to accept the first offer or lowball offers if an employer is trying to bully them. Acting reasonably and standing firm in knowing their entitlements will show both the courts and employers that an employee is open to a reasonable deal.

It is not always an easy balance to strike, as employment disputes are emotional by nature. Therefore, employees should follow their lawyers’ guidance and advice to walk through this emotional and challenging journey to get what they deserve as efficiently as possible.

Employers in Ontario must accommodate employees based on their family status. This means that employers must make reasonable efforts to accommodate if an employee cannot work certain shifts or requires modified working hours due to their responsibilities in caring for children or other family members. However, this obligation is not absolute. It is limited by the “undue hardship” principle—a high threshold that employers must meet to justify why they cannot accommodate an employee.

What Is the Duty to Accommodate?

The duty to accommodate requires that employers adjust work schedules, tasks, or other employment conditions so employees can meet family obligations. This duty continues until it reaches the point of undue hardship, which involves considering factors such as cost, health, safety, and the impact on the organization’s operations.

However, undue hardship is not the only limitation of this duty. Courts and tribunals have clarified that employees are not entitled to “perfect accommodations” but rather to those that are reasonable under the circumstances. This distinction means accommodations must address human rights needs rather than personal preferences and be balanced against the business’ operational requirements.

The Case of Aguele v. Family Options Inc.

The recent decision of the Human Rights Tribunal of Ontario (“HRTO”) in Aguele v. Family Options Inc., 2024 HRTO 991 (“Aguele”) is illustrative of how the duty to accommodate based on family status is applied in practice. In this case, the employee, a single mother, faced difficulties in securing childcare for her six-year-old child during late evenings and weekends. The employer did not accommodate with the shift schedule she asked for and reduced the overall number of shifts she was scheduled for. So, she quit her job and filed an application with the HRTO, alleging discrimination based on family status and reprisal by her employer. The employee claimed that the employer’s refusal to modify her shifts to her requests and its subsequent reduction of her shifts amounted to constructive dismissal.

The HRTO found that the employer had met its duty to accommodate. It highlighted that many employee requests for shift changes were based on preference, not necessity. For instance, the employee admitted that she could work shifts from 4:00 p.m. to midnight but found them “not ideal” and was “not happy” doing so. This indicated that her accommodation requests were not grounded in a genuine need related to family status.

The HRTO emphasized that employees “are not entitled to perfect accommodation, but rather to accommodation that is reasonable in the circumstances.” Interestingly, what is considered reasonable in the circumstances also depends on the nature of the employer’s business. In Aguele, the employer is a provider of residential housing and support services to adults with developmental and intellectual disabilities; as it serves a highly vulnerable population, and due to the importance of consistency, the employer “usually schedules staff to work in only one home at a time and requires them to be available to work regularly, with most or all schedules including at least some weekends or evening shifts.” As a result, some of the shifts or changes requested by the employee were simply not feasible, given the nature of the employer’s service, their clients’ needs, and their funding model.

Key Takeaways from Aguele

1. Reasonable, Not Perfect, Accommodations: The HRTO reiterated that employees are not entitled to a “perfect” solution but rather a reasonable accommodation based on their specific needs. In this case, the employer’s inability to meet every shift change request did not breach its duty to accommodate.
2. Nature of the Employer’s Business: The context of the employer’s business is important in determining what constitutes reasonable accommodation. In Aguele, the employer served a highly vulnerable population, and the need for consistency in staff scheduling was critical. This operational necessity justified the employer’s scheduling approach and limited flexibility in making changes.
3. Cooperative Process: Accommodation is a two-way street, requiring both parties to cooperate. The HRTO observed that the employee must provide sufficient information to enable the employer to understand the nature of their family status needs. On the other hand, where an employee has not expressly made their accommodation needs known, there nonetheless may be a duty on the employer to inquire further in circumstances in which there is reason to believe that the employee is having difficulty, because of personal characteristics protected by the Human Rights Code.

Lessons for Employees

The Aguele decision highlights the nuanced nature of the duty to accommodate family status. While employers must accommodate up to the point of undue hardship, they are not required to provide solutions that meet an employee’s every preference. Employees who misunderstand this distinction may make a wrong choice; as seen in Aguele, the employee quit her job only to get her case dismissed.

Employees should seek professional guidance before making important decisions based on accommodation issues to understand their rights and obligations better.

The Aguele decision reminds us that accommodation is a cooperative duty involving both parties. Effective communication, reasonable expectations, and a willingness to find practical solutions are vital to achieving successful outcomes for employers and employees. Employees should not forget that they need to do their part, or they may fall out of the scope of protection of the law.