Under the common law, a court can find that an employee was constructively dismissed in two circumstances – when there has been a substantial change in the terms of their employment agreement or a series of acts that show the employer intends to no longer be bound by the agreement. This is distinguished from a termination where the employer expressly tells the employee that they are terminated. 

This article looks at both forms of constructive dismissal, along with a recent Ontario Superior Court of Justice decision in which an employee claimed that he was constructively dismissed after his employer was acquired. 

Two types of constructive dismissal

Constructive dismissal typically arises in one of two ways in the employment relationship. The first instance of constructive dismissal is when the employer unilaterally changes one or more of the existing terms and conditions of employment. For example, the employer may substantially change the employee’s working environment, salary, or role. 

The second instance occurs when a series of acts are taken together that indicate that the employer no longer intends to be bound by the employment contract. This might be found if, for example, the employee is forced to work in what amounts to a poisoned work environment.

The employee needs to prove that the employer’s conduct repudiated the terms of the employment relationship

Determining whether an employee has been constructively dismissed is complex and generally requires guidance from a knowledgeable employment lawyer.

To establish the first form of constructive dismissal, the employee needs to show that:

• the employer’s unilateral change constitutes a breach of the employment contract; and 
• it substantially alters an essential term of the contract, from the perspective of a reasonable person in the same situation as the employee (whereby a reasonable person would have felt that the essential terms of the employment contract were being substantially changed). 

The second form of constructive dismissal requires the plaintiff to prove that a reasonable person, in the same situation as the employee, would have concluded that the employer’s conduct demonstrated an intention to no longer be bound by the employment contract. 

Plaintiff’s employer was acquired, after which he took a medical leave of absence

In Morey v C.A.T., the plaintiff employee started working as a short-haul truck driver for a company in 1993. He was paid a combination of hourly rates and mileage. In 2017, the defendant entered into an agreement to purchase the company (the plaintiff’s employer). The acquisition was completed in May 2019.

The plaintiff said that upon acquisition, the defendant extended an offer of employment to the plaintiff, promising not to change his position, duties or wages. However, he claimed that the new employer’s compensation plan resulted in lower compensation and that the employer refused to maintain or repair the trucks. 

The plaintiff alleged that, as a result of the employer’s conduct, he had to take a medical leave of absence in May 2019. He ultimately did not return to work and sought damages of $230,000 for constructive dismissal.

Court found no evidence that the compensation plan would result in a substantial detrimental change

The employee argued that his employer had changed the compensation structure introducing material uncertainty in both the manner and the amount of compensation he would receive. 

Justice Brown, after considering the evidence on the two compensation plans, found that both were based on a combination of mileage and hourly rates. As compensation was not based on a fixed income, but was variable, week to week, and year over year, simple income comparisons between 2018 and 2019 did not establish that the new plan was less remunerative. 

Her Honour explained that an employee’s perceptions and sensitivities as to the change are not sufficient to establish constructive dismissal, stating:

“It is understandable that he would feel more comfortable with a plan he had worked under for a long period of time as opposed to a new plan that he had worked under for nine business days due to the unfamiliarity of the new plan.”

Her Honour found that it was just as likely that the employee’s compensation would have been comparable to, or better, than at the previous company. As a result, the Court was unable to find that the new compensation structure resulted in a substantial detrimental change to the plaintiff, nor that a reasonable person would conclude that the employment contract was substantially breached.

Court decided that plaintiff was not constructively dismissed

The plaintiff also claimed that the employer reduced his hours and terminated short-haul routes which then required the plaintiff to accept long-haul work to increase his income. Justice Brown disagreed, deciding that the employer had simply lost contracts and did not actively terminate short-haul routes. 

Finally, her Honour dismissed the plaintiff’s claim that the employer’s conduct evinced an intention to no longer be bound by the contract. The plaintiff alleged that he was forced to drive unsafe vehicles and was bullied into compliance in that regard. Her Honour rejected these allegations, preferring the employer’s evidence on truck maintenance and noting that the plaintiff was on the workplace health and safety committee and, in all the examples he raised, he agreed to drive the vehicles with knowledge of the issues. In addition, there was no evidence from medical professionals to establish that the plaintiff’s medical leave was related to his work. 

The Court dismissed the employee’s claim that he was constructively dismissed.

Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Constructive Dismissal

Leaving the workplace before you know your rights, or deliberately trying to push an employee out may be a costly mistake. The highly-experienced employment lawyers at Grosman Gale Fletcher Hopkins LLP can help you create a clear strategy before taking action. We have helped both employers and employees navigate terminations, including constructive dismissals. Contact us online or by phone at 416-364-9599 to schedule a consultation.