Constructive dismissal occurs when an employee is not formally terminated, but the employment relationship is nonetheless brought to an end in the eyes of the law. This can arise from the employer unilaterally making a single fundamental change, or from a pattern of misconduct in the workplace that the employer causes, condones, or fails to address.
Two Legal Paths to Constructive Dismissal
In Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, the Supreme Court of Canada stated that constructive dismissal occurs if one of the two branches of the constructive dismissal test is met.
Branch 1: A Unilateral Change to an Essential Term
Constructive dismissal may occur where (a) the employer unilaterally acts, including without the employee’s consent, (b) the unilateral act substantially alters an essential term of employment, and (c) at the time the breach occurred, a reasonable person in the same situation as the employee would have felt that the essential terms of the employment contract were being substantially changed.
Though every case is determined based on its specific facts, constructive dismissal under the first branch may arise from major demotions, significant pay reductions, changes in key responsibilities, or layoffs, forced leaves of absence or suspensions without pay.
Branch 2: Conduct Showing an Intent Not to Be Bound
Constructive dismissal may also be found where a course of conduct demonstrates that the employer no longer intends to be bound by the employment contract. This may include not only the employer’s own actions, but also serious workplace misconduct by others that the employer fails to prevent or address.
The second branch considers the cumulative effect of the conduct and the employer’s response, including inaction.
Depending on all the circumstances, a single act or stand-alone incident can result in an employee’s continued employment becoming intolerable and evince an intention by the employer not to be bound by the contract.
Though every case is determined based on its specific facts, constructive dismissal under the second branch may arise from ongoing bullying, persistent or serious harassment, including sexual harassment, repeatedly undermining an employee’s role, or other conduct that destroys trust and confidence in the employment relationship.
Key Legal Considerations
Not every workplace conflict or problem amounts to constructive dismissal. For example, depending on the circumstances, a short unpaid suspension imposed in good faith as part of a solid progressive disciplinary program may not, in itself, constitute constructive dismissal.
Employees must proceed carefully. Leaving one’s employment too quickly or commencing legal action prematurely can cause complications for the employee.
On the other hand, not expressing opposition sufficiently promptly can cause other complications for the employee.
An employee asserting constructive dismissal must still mitigate damages. Depending on the circumstances, this could in some circumstances include continuing to work for the employer for a reasonable period while seeking other employment.
Constructive dismissal is an important concept because it enforces a basic employment law principle, that employers cannot avoid their termination obligations by making the workplace untenable or by stripping away essential terms and waiting for the employee to quit.
Constructive dismissal removes the incentive for employers to attempt end-runs around their obligation to provide reasonable notice. By protecting the integrity of the employment relationship, it restores some of the power imbalance that is inherent in the employment relationship.
Speak With a Lawyer
Constructive dismissal claims are fact specific and legally complex. Early legal advice is often critical to preserving your rights.
If you have been dismissed or think you may have been constructively dismissed, are experiencing issues at work, or simply want to understand your rights, we are here to help. Learn more about Inspire Law or book a consultation to discuss your specific situation.
This article is for general informational purposes only, does not constitute legal advice, and is not directed at any particular client or case. The views expressed herein are based on current law, specific facts and available information and may not be applicable to your specific situation or to any matter on which we may act. You should not rely on this material in place of consulting a qualified lawyer about your own situation.
About the Author
Susan Kootnekoff is a lawyer and founder of Inspire Law, an employment and human rights law practice that serves clients across British Columbia and beyond. She represents clients in employment related matters including wrongful dismissal claims, employment contract negotiations, severance negotiations, human rights complaints and workplace rights.
© 2025 Susan Kootnekoff, Barrister & Solicitor
