What Is A Constructive Dismissal?

Constructive dismissal occurs when an employer makes a significant change to the terms of your employment, without your consent, that effectively forces you to leave. The law treats this as a dismissal, even though the employee is technically the one who resigned.

The reasoning is straightforward: if your employer has fundamentally changed the job you agreed to do, you shouldn’t be penalized for walking away from it.

Most people think of being fired as a clear, direct event — your employer calls you in, tells you your position is terminated, and hands you a severance package. But in Ontario, you can be legally dismissed without anyone ever saying the words “you’re fired.”

Not every workplace change qualifies. Minor adjustments, reasonable exercises of management authority, and small shifts in responsibility generally do not amount to constructive dismissal. 

The change must be substantial: that is, it goes to the heart of the employment relationship.

Common examples include:

• A significant pay cut — reducing an employee’s salary or eliminating bonuses or commissions that form a core part of their compensation.
• A dramatic change in role — demoting an employee, stripping them of meaningful responsibilities, or reassigning them to a position well below their experience and seniority.
• Forced relocation — requiring an employee to work in a different city or location that was not part of the original agreement.
• Intolerable working conditions — creating or allowing a poisoned work environment through harassment, bullying, or deliberate humiliation.
• Removal of authority — taking away management responsibilities or direct reports in a way that fundamentally changes the nature of the position.
• Repeated or cumulative changes — a series of smaller changes that, taken together, amount to a fundamental breach of the employment contract.

Ontario courts apply a two-part test to determine whether constructive dismissal has occurred:

Step 1 — Did the employer breach a fundamental term of the employment contract? The court looks at whether the employer unilaterally changed something essential to the employment relationship — compensation, duties, title, location, or working conditions.

Step 2 — Would a reasonable person in the employee’s situation feel they had no choice but to leave? The change must be serious enough that staying would be unreasonable. A minor inconvenience or temporary disruption is unlikely to meet this standard.

Both steps must be satisfied. Courts look at the full context — not just a single moment, but the overall pattern of the employment relationship.

This is where many employees make costly mistakes. Here are the most important things to keep in mind:

Do not resign immediately without legal advice. Walking out the door without understanding your rights can seriously damage your claim. Timing and how you communicate your departure matters enormously.

Do not simply accept the change. If you continue working under the new terms for an extended period without objecting, a court may find that you implicitly accepted the change — effectively waiving your right to claim constructive dismissal.

Object in writing. If your employer announces a significant change, put your objection on the record in writing as soon as possible. 

Act within a reasonable time. You cannot sit on a constructive dismissal claim indefinitely. Ontario’s basic limitation period is two years — but practically speaking, the longer you wait, the more complicated your position becomes.

If constructive dismissal is established, you are entitled to the same remedies as an employee who was wrongfully dismissed — most importantly, reasonable notice or pay in lieu of notice.

The amount depends on factors including:

• Your length of service.
• Your age.
• The nature and seniority of your position.
• Your ability to find comparable employment elsewhere.

In some cases, additional damages may be available — particularly where the employer’s conduct was high-handed, bad faith, or intended to humiliate.

As discussed in our article on wrongful dismissal, reasonable notice in Ontario can range from a few weeks to upwards of 24 months for long-serving senior employees — making the financial stakes significant.

We represent both employees and employers in constructive dismissal matters. If you believe your employer has fundamentally changed your job without your consent — or if you are an employer navigating a difficult restructuring — we can help you understand your rights and obligations.

Contact us at 416.901.9984 or info@pintoshekib.ca for a confidential consultation.