Constructive Dismissal

Applying the Test

The Terms of the Contract

The first step in the analysis is then to determine the existing terms of the contract between the parties. The Alberta Court of Appeal reviewed this issue in its June 2021 decision. 1 As noted in this instance:

  1. Terms may be oral and may be determined by the trial judge based on the evidence;
  2. The intent may be found in the manner as a person has conducted himself as showing his apparent acceptance;
  3. The test is an objective one;
  4. The above applies to both written and oral terms;

The determination of the contract terms is an objective one. 2

A good example of the application of this analysis in the decision of the Ontario Court of Appeal in 2019. The reasons are significant as the Court of Appeal set aside the finding of the trial judge who had found in the plaintiffs favour on this issue. 3 The issue involved a change in the incentive compensation plan, one which did allow the employer to make the revision it did. The Court of Appeal then looked to the terms of the contract and found that the change was contemplated and there could be no claim on this basis. 4

A Search for the Facts

As noted in Potter, the determination of whether there has been a constructive dismissal is a “highly fact-driven exercise”:5

In each case, determining whether an employee has been constructively dismissed is a “highly fact‑driven exercise” in which the court must determine whether the changes are reasonable and whether they are within the scope of the employee’s job description or employment contract …. Although the test for constructive dismissal does not vary depending on the nature of the alleged breach, how it is applied will nevertheless reflect the distinct factual circumstances of each claim.

Magnitude of the Change

The B.C.S.C. reviewed a claim made of constructive dismissal, one which was dismissed at trial. The court found that the essential job functions of Litho Manager remained in place, notwithstanding the removal of the functions of purchasing and inventory. This was not enough of a change to allow for a constructive dismissal, particularly in the context of a restructure. 6

This issue was discussed in a Nova Scotia Court of Appeal decision in 2019 9 The employee then must show that a reasonable person in the employee’s circumstances would have concluded that the employer’s intention was to be no longer bound by the contract. This is distinct from proving that this was the employer’s intent.

A similar finding was made in an Ontario case in February of 2018. 10 The plaintiff had successfully shown that her vacation pay was improperly calculated. She was owed $1,209, an amount which could not support the Potter test.

Clarity of the Amended Role

The employer must be sure to be clear in its communication of the intended changes to the employee. The failure to do so may create uncertainty. If so, it is responsible for the consequences which may follow. 11 12

An employer has an obligation to convey its proposal regarding changes clearly to the employee. Where it fails to consult with the employee in this manner, leading to uncertainty as to the implications of the proposed changes, it alone must bear the consequences., 1997 CanLII 12329 (ON SC) (at para. 164). Plainly, the defendant failed in this obligation.