Constructive Dismissal




There are two leading cases on this subject from the Supreme Court of Canada. The first is a 1997 case dealing with a demotion to the employee’s position and revisions to his compensation plan.1 The second is a 2015 Supreme Court of Canada decision dealing with the issue of an administrative suspension. 2 These cases have set the test to determine if there has been a constructive dismissal.

In Potter and cases following, the courts have also added to the analysis a full appreciation of the terms of the employment relationship, the vulnerability of the employee in an unequal power dynamic and the need to be sensitive to the issues confronting the employee at such a moment when considering to reject or accept the revised terms of employment. These decisions did not revise the existing law.

The five mile up analysis is that the court may construct a dismissal from a change in the agreed or implied terms of employment, or a toxic work environment, which has not been condoned. Once the terms of the agreement have been settled, then the court will examine the nature of the breach, to assess whether, objectively seen, it reveals the intention of the employer to no longer be bound by the original agreement. The analysis may then turn to the question of whether the change has been condoned or accepted by the employee.

A subtopic of the above issue is whether a statutory lay-off may be considered as such a change. Related to this question is whether COVID restrictions upon working conditions represent conduct meeting the test of constructive dismissal. These issues are reflective of the court completing step 1 of the analysis, as set out in Potter discussed below,  to determine what are the terms of employment, as agreed, or as implied.

There are other issues which will arise where the dismissal is due to a revision in the terms of employment, as opposed to one based on an abusive working relationship.

One is what conduct a court will consider to determine whether the employee has accepted, or condoned the employer’s action in providing the amended terms of the contract. A second is whether there nonetheless exists an obligation to remain in the demoted position to mitigate the damage claim. This principle first arose in an Ontario Court of Appeal decision in 1989 3. A further Supreme Court of Canada decision also will be relevant in the same context of looking to this mitigation issue, decided in May of 1998. 4

A further issue is whether the employee wishes to assert that the employer's conduct has repudiated an existing employment contract, thus usually allowing the claim to be based on common law standards.