Constructive Dismissal Legal Definition:

A fundamental violation of the rights of an employee, by the employer, so severe that the employee would have the right to consider himself as dismissed, even though, in fact, there has been no act of dismissal on the part of the employer.

Related Terms: Constructive Discharge

In Volume 16(1b) of Halsbury's Laws of England, (2005, 4th Ed), page 91, the authors use these words:

"An employee who terminates the contract of employment with or without notice may still claim to have been dismissed if the circumstances are such that he is entitled to terminate it without notice by reason of the employer's conduct. The employee must leave in response to the breach of contract."

In  a Canadian case, Farber v. Royal Trust Co., [1997] 1 SCR 846, Canada's Supreme Court defined it as follows:

"Where an employer unilaterally makes a fundamental or substantial change to an employee’s contract of employment – a change that violates the contract’s terms – the employer is committing a fundamental breach of the contract that results in its termination and entitles the employee to consider himself or herself constructively dismissed."

Under the employment law of some jurisdictions, judges will consider a situation where there has been a fundamental violation of the employment contract, by the employer, so severe that the employee would have the right to consider himself as dismissed, even though, in fact, there has been no act of dismissal on the part of the employer.

For example, if an employer tries to force an employee to accept a drastic demotion, the employee might have a case for constructive dismissal and would be able to assume that the employment contract has been ended and seek compensation from a court.

Each case will turn on its own facts and (from Re Rubel Bronze & Metal Company, [1918] 1 KB 315:

".. depend on the character of the contract, the number and weight of the wrongful acts or assertions, the intention indicated by such acts or words, the deliberation or otherwise with which they are committed or uttered, and on the general circumstances of the case."

In a 1986 Nova Scotia case, Fisher v Eastern Bakeries, 73 NSR (2d) 336, the law was summarized as follows:

"Whether or not an employee has been unjustly dismissed is largely a question of fact. Where a plaintiff has resigned from his employment, as in the present case, and claims that the resignation was merely the final result of a constructive dismissal, the court ought scrutinize all of the facts very carefully and determine whether or not a reasonable interpretation of those facts supports the plaintiff's contention. In a case such as this, the court must be satisfied that the plaintiff has established on the balance of probabilities that the defendant's conduct, vis-a-vis the plaintiff, was such that the duties required of the plaintiff were substantially different from those for which the plaintiff had contracted. If the plaintiff establishes that, then a court may find that the defendant's conduct amounted to constructive dismissal."

In the analysis of the circumstances, the Court will look first to the employment contract. In Woodward v Dubois Chemicals of Canada, at 1988 Ontario Judgments 1984, the Ontario High Court of Justice said:

"Changes in the existing working relationship between an employer and an employee do not per se give the employee the right to treat the contract as terminated. It must be determined whether the changes are contemplated by the existing contractual agreement. If they are, then the employee can have no complaint. If the changes are not contemplated, then the question becomes whether they are significant enough to justify regarding the contract as terminated."

Further, the Court is looking for a shift of some significance, as it cannot be every annoyance of the employer that leads to a constructive dismissal claim.

In Smith v Viking Helicopter, 68 OR (2d) 228, (1989), the Ontario Court of Appeal stated:

"(F)or a finding of constructive dismissal there must be some behaviour on the part of the employer that amounts to a fundamental alteration in the terms of the employment contract....

"In my opinion, a damage action for constructive dismissal must be founded on conduct by the employer and not simply on the perception of that conduct by the employee. The employer must be responsible for some objective conduct which constitutes a fundamental change in employment or a unilateral change of a significant term of that employment. A decision to change its manner of conducting its business or a move to another place of business does not necessarily result in such a fundamental breach of its contract with its employees as to constitute a constructive dismissal."

In The Law of Dismissal in Canada by H. Levitt (Canada Law Book, 1992), the author gives these examples which have justified successful constructive dismissal claims:

  • a refusal to allow the employee to work;
  • filling the employee's position with another person;
  • changing the hours of employment;
  • declaring a temporary inability to pay the employee's wages;
  • placing an employee on probation; and
  • unreasonably postponing an employee's starting date.

In Viren Shah v Xerox Canada Ltd., 49 CCEL (2d) 166 (2000), the Ontario Court of Appeal considered the case of Mr. Shah who suddenly found himself subordinate to a heavy-handed supervisor at Xerox, and resigned and then successfully claimed constructive dismissal.

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