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Constructive Dismissal in Canada: The Test, Examples and What Happens Next

Updated

Constructive dismissal is when your employer doesn’t fire you outright but changes a fundamental part of your job without your agreement, or acts in a way that shows it won’t keep to the employment contract, and you leave because of it. The law can then treat the job as ended by the employer, not by you: Ontario’s guide counts it as a termination when the employee resigns in response within a reasonable time, and the Supreme Court of Canada has said such an employee “has not resigned, but has been dismissed”. Government guides call the change “significant” or “major”, the Supreme Court “substantial”, and each case turns on its facts and the contract’s terms. If your hours, pay or duties were just cut, what an employer may change is on my employer cut my hours, pay or duties.

What is constructive dismissal?

The federal Labour Program describes it as a case where the employer “has not directly fired the employee” but has broken the employment contract “in a major respect”, changed the terms of employment on its own, or shown “a settled intention” to do either, which forces the employee to quit. It adds that the idea is sometimes called “disguised dismissal” or “quitting with cause”.

Ontario’s guide describes a significant change to a fundamental term or condition of the job, made without the employee’s “actual or implied consent”. Alberta’s page describes an employer doing something “so contrary to the employment relationship” that it forces the employee to quit, and says the changes “must be significant”.

What separates this from an ordinary resignation, in the Labour Program’s words, is “the employer’s failure to meet its contractual obligations”.

What test do courts use?

The Supreme Court of Canada set out the test in Potter v. New Brunswick Legal Aid Services Commission. These are its conditions:

  • There are two ways to show it: a specific change that breaches a term of the contract, or conduct over time that shows the employer no longer intends to be bound by the contract.
  • For a specific change, the court asks first whether the employer's unilateral change breached the contract and, if it did, whether it substantially altered an essential term of the contract.
  • A change is not unilateral, and so is not a breach, if the contract expressly or impliedly lets the employer make it, or if the employee consents to it or acquiesces in it.
  • To count as a breach, the change must be detrimental to the employee.
  • The second step asks whether, when the breach occurred, a reasonable person in the same situation as the employee would have felt that the essential terms of the contract were being substantially changed.
  • A breach so minor that it could not be seen as substantially changing an essential term is not constructive dismissal.
  • For the second form, the question is whether the employer's conduct, viewed in the light of all the circumstances, would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract.
  • Without pointing to a specific breached term, an employee can show that the employer's treatment of them made continued employment intolerable and, taken together, showed an intention not to be bound by the contract.
  • When the employer's conduct shows it no longer intends to be bound, the employee may accept the changes or treat them as a repudiation of the contract and sue for wrongful dismissal.
  • The employee has the burden of establishing that they were constructively dismissed.

In Farber v. Royal Trust Co., the Supreme Court put the starting point plainly: when an employer makes substantial changes to the essential terms on its own and the employee doesn’t agree and leaves, “the employee has not resigned, but has been dismissed”. The same decision says the employer needn’t have “intended to force the employee to leave” or acted “in bad faith”. The federal Labour Program adds that the question turns on “an objective view of the employer’s conduct”, not “merely on how the employee perceives the situation”.

What kinds of change have courts and labour departments treated as constructive dismissal?

The Labour Program lists kinds of change in which courts have found a constructive dismissal, warning that its examples “are not exhaustive”. Who names what:

  • Duties and powers. The Labour Program calls material changes in powers or duties “the most common cases”: usually removing a main area of responsibility or cutting duties, with or without a change in salary or job title.
  • Demotion. In Farber, the Supreme Court noted decisions in Quebec and the common-law provinces holding that a demotion, “which generally means less prestige and status”, warrants a finding of constructive dismissal.
  • Pay. Farber notes decisions holding that a significant reduction in an employee’s income amounts to constructive dismissal, and others that a unilateral change to how pay is calculated justifies the same finding. Ontario’s guide names a significant reduction in salary, and Alberta’s page a significant reduction in wage rate.
  • Hours, location and position. The Labour Program names “a major reduction in their hours of work” and a change in work location; Ontario’s guide names a significant negative change in hours, location, authority or position, and Alberta’s page a significant change in hours, location or position.
  • Harassment and ultimatums. Ontario’s guide includes an employer who harasses or abuses an employee, or gives an ultimatum to “quit or be fired” and the employee resigns in response.
  • Threats and suspensions. The Labour Program describes quitting in response to threats of dismissal or demotion, and an unfair suspension or pay cut that “creates an intolerable situation”.
  • Status and work tools. The Labour Program names turning a salesperson from employee into independent contractor, and removing a company vehicle that is “an essential work tool” without good reason.
  • Layoffs. Ontario’s guide says a layoff the contract doesn’t allow may be a constructive dismissal, and Alberta’s page that some courts have let such an employee sue; the rules are on is a temporary layoff legal.
  • Benefits. The Labour Program puts benefits in a heading with hours and salary but gives no benefit example; see when your benefits are changed.

The Labour Program also names cases that are not a constructive dismissal: a move to another location in the same city, or a relocation the employee knew was part of the job; and it says mere encouragement to resign “will not necessarily be sufficient”.

What happens if you keep working, object or resign?

Keeping on without objecting. Alberta’s page says continuing to work under new conditions “may be taken as acceptance of those conditions”, and the Labour Program says that by not resigning, the employee “indicates he accepts the new conditions of employment”. But it also describes courts finding a constructive dismissal although the employee stayed, working on to mitigate damages while protesting the new conditions explicitly or reserving the right to take legal action; an employee who starts legal proceedings, or tries to negotiate, while still at work hasn’t “condoned or accepted” the change. In Farber, the Supreme Court said that an employee being prepared to accept some of the changes “is not conclusive”. Accepting a change or treating it as a repudiation is in the test; mitigating is on the duty to mitigate.

Resigning. The three government sources put this in terms of time, not a count of days: the Labour Program says the employee clearly indicates non-acceptance and leaves “within a reasonable period (usually short)”, Ontario’s guide says “within a reasonable period of time”, and Alberta’s page says employees “must quit soon after a change”.

When the employer answers an objection. The Court of Appeal for Ontario has said that when an employee rejects a new term, the employer “may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms”; the passage is set out on changes without your agreement.

Proving it. Alberta’s page says “Employees should be prepared to support their position of constructive dismissal”, and the Labour Program says people alleging it “may wish to seek independent legal advice”.

How do Ontario, B.C., Alberta and the other provinces treat it under employment standards?

These laws address it in their own words (which law covers you is in the workplace rights guide):

  • Ontario. Ontario’s guide lists the ways a job ends under its Employment Standards Act. A person's employment is also terminated under the Act if the employer constructively dismisses them and they resign in response within a reasonable time, and in most cases, for an employee continuously employed for three months, an Ontario employer then owes written notice, termination pay or a combination. Ontario’s severance chapter counts the job as severed in the same case (severance if you resign).
  • Alberta. The page says an employee who quits because of a constructive dismissal may be entitled to the termination pay they would have been owed had the employer ended the job, and names an employment standards complaint as the route.
  • British Columbia. The Act lets the director decide that employment has been terminated when a condition of employment is substantially altered. B.C.’s temporary layoffs page says the Employment Standards Branch may decide a job has ended when an employer makes substantial changes to conditions such as hours or pay (temporary layoffs).
  • Yukon. The Act says terminating an employee includes an alteration of a condition of employment that the director declares to be a termination.
  • Nunavut. The Act says that where an employer has substantially altered a condition of employment and the Labour Standards Officer is satisfied the purpose is to discourage the employee from continuing in the employment, the officer may declare that the employer has terminated the employment.

For the other provinces and the Northwest Territories, the employment standards pages and Acts read for this site’s data don’t use the term. Potter describes the employee’s choice at common law: accept the change, or treat it as a repudiation and sue for wrongful dismissal.

What if you work in a federally regulated job?

The Labour Program’s interpretation says the Canada Labour Code’s unjust dismissal provisions cover constructive dismissals, and that the Code’s individual termination and severance pay provisions may also apply. The federal termination page says affected employees “may file a monetary complaint for termination pay and/or severance pay or an unjust dismissal complaint”.

For an unjust dismissal complaint, the Labour Program says a constructive dismissal takes place when the employer changes the terms and conditions of employment, and the complaint has to be filed within 90 days of that time, unless the employee qualifies for more time under subsection 240(3) of the Code.

A federally regulated employee can make an unjust dismissal complaint under the Canada Labour Code with 12 consecutive months of service with the employer, if they are not covered by a collective agreement and are not a manager, and the complaint is filed within 90 days of the dismissal. The full conditions are on federal unjust dismissal.

What can you get?

Under employment standards, the notice or termination pay owed when an employer ends a job (Ontario, Alberta, federal) and statutory severance (Ontario, federal) can be claimed, and Alberta’s and the federal pages name a complaint as the route; amounts are on notice and termination pay and statutory severance. In court, Potter says a successful employee “is then entitled to damages in lieu of reasonable notice of termination”, set as explained on common-law reasonable notice. Choosing between complaint and lawsuit, and the time limits, are on choosing a route and time limits.

Can you get EI if you resign?

EI applies its own test after a resignation: the Employment Insurance Act asks whether there was “just cause for voluntarily leaving an employment”. What counts is on can you get EI if you quit.

Sources

The figures and rules on this page come from these sources, last checked against them between October 6, 2026 and October 16, 2026. How we check facts.