Constructive Dismissal: The Bane of An Employment Lawyer’s Existence

Definition of Constructive Dismissal:  The Traditional Definition

Until recently, a constructive dismissal was found to take place when an employer breaches an implicit or explicit term of contract and that breach “substantially alters an essential term of the contract.” The judge would apply an objective test; that is, at the time of the breach, would a reasonable person in the same situation as the employee have felt that the essential terms of the contract were being substantially changed?

Definition of Constructive Dismissal: The New Definition

In 2015, the Supreme Court of Canada recognized a second type of constructive dismissal. This kind of constructive dismissal occurs if an employee can show the employer no longer intends to be bound by the employment contract; the employee does not have to show that a specific term of the employment contract has been breached. For more information on this case, read my previous post “Supreme Court of Canada Update: Administrative Suspension Equals Constructive Dismissal.”

Traditional Constructive Dismissal Cases

Until the last few years, most constructive dismissal cases involved changes in compensation, and/or changes in job duties. Recently, however, the courts have expanded constructive dismissal law to other situations.

Non-Traditional Constructive Dismissal Cases

Here are three non-traditional constructive dismissal cases:

1. Unpaid Suspensions

It is generally good human resources practice to progressively discipline an employee and one step in this process is usually a suspension. Unless the employee agrees, the employer has the right to suspend him without pay, however, such a suspension is generally a termination at common law. Accordingly, we suggest that an employer include such a term of employment in an employment contract.

2. Temporary Layoffs

Although a “temporary” layoff is permitted under the Employment Standards Act, such a layoff often constitutes a termination at common law unless the employee has agreed that a temporary layoff is a term of his employment. Accordingly, we suggest that an employer include such a term of employment in an employment contract.

3. Paid Administrative Leaves

In 2015, the Supreme Court of Canada concluded that an employer does not generally have the right to withhold work from an employee unless it can demonstrate that it is reasonable and justified. Furthermore, this court stated that an administrative suspension will usually not be justified where there has been no communication with the employee about the reason. Accordingly, we suggest that an employer provide reasons for the leave to the employee before the leave commences or include such a term of employment in an employment contract.

For more information on constructive dismissal law, read our other blogs on constructive dismissal.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship including constructive dismissal cases. If you have any questions, you can contact him at 416 317-9894 or at [email protected]