Constructive Dismissal

The Two-Branch Test

In Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, the Supreme Court held that an employee is constructively dismissed if either of the following branches is satisfied:

Branch 1 — A Single Unilateral Change to an Essential Term

Constructive dismissal occurs where:

1. The employer unilaterally makes a change to the employee’s employment contract,
2. The change substantially alters an essential term of the employment contract, and
3. A reasonable person in the employee’s position would view the employer’s conduct as a fundamental breach of the contract.

Examples: major demotions, significant reductions in pay, removal of key responsibilities, or relocation without consent.

This branch focuses on a specific, substantial change to the employment relationship.

Branch 2 — A Course of Conduct Showing Intent to No Longer Be Bound

Constructive dismissal may also be found where:

1. The employer’s course of conduct over time demonstrates that it no longer intends to be bound by the employment contract,
2. Such conduct would lead a reasonable person in the employee’s position to conclude that the employer repudiated the contract.

Examples: persistent harassment, a pattern of undermining the employee, or a series of breaches indicating the employer has destroyed the employment relationship.

This branch focuses on the cumulative effect of conduct rather than a single change.

The onus is on the employee to establish that he or she has been constructively dismissed: Potter v New Brunswick Legal Aid Service Commission, 2015 SCC 10.

A suspension from work without pay for relatively short periods of time, for administrative reasons, where the employer is acting to protect legitimate business interests and acting in good faith may not be sufficient, in itself, to constitute constructive dismissal.

An employee who leaves the workplace or commences wrongful dismissal action against his or her employer may run the risk of being found by a court to have repudiated the employment contract (ie, quit instead of being constructively dismissed), in which case he or she will not be entitled to a severance payment.  

The potential also exists for a court to find that the act of suing an employer while still at work can amount to just cause for dismissal.

Sometimes a determination will need to be made on whether an employee has, in the eyes of the law, resigned or been dismissed. For example, an employee who was harassed at work and so was unable to continue working in that workplace may resign, but depending on the circumstances, the departure may legally be considered to have been a dismissal.

An employee asserting constructive dismissal must still be able to demonstrate that he/she acted to mitigate his/her damages. This could require the employee to continue working for his or her current employer while seeking other employment (Cayen v. Woodwards Stores Ltd. (1993), 75 BCLR (2d) 110 (CA)). The Supreme Court of Canada discussed the relationship between constructive dismissal and mitigation in Evans v Teamsters Local Union No. 31, 2008 SCC 20. Depending on the circumstances, an employee’s refusal to accept re-employment with the employer who fired him/her could be considered a failure to mitigate damages. However, this may not be so if the employer’s actions eroded trust between the parties. See: Fredrickson v. Newtech Dental Laboratory Inc., 2015 BCCA 357.

An employee who does not complain about the changes imposed by the employer may be considered to have accepted the change or acquiesced to it, and be unable to later complain about them. An employee is generally permitted a reasonable time to determine whether he or she will accept the changes.