Constructive dismissal

Constructive dismissal is when an employer's big unilateral change to a job, or its conduct, is treated in law as firing the employee.

Also called: constructive termination, forced resignation

What constructive dismissal means

Constructive dismissal happens when you do not actually fire someone, but you change the job so much, or treat them so badly, that the law treats it as if you had. The employee can quit and claim the same notice or pay in lieu they would have received if you had ended their employment without cause.

It catches small employers off guard because it usually starts with a business decision that seems reasonable: cutting pay, moving someone to a lesser role, changing a day shift to nights, or suspending someone indefinitely while you figure things out.

How it works

The Supreme Court of Canada set out the test in Potter v. New Brunswick Legal Aid Services Commission (2015). There are two ways to get there. The first is a single change you make without the employee's agreement that breaches the contract and substantially alters an essential term, such as pay, duties, hours or location. The second is a pattern of conduct that, looked at as a whole, would make a reasonable person conclude you no longer intend to be bound by the employment contract. A series of acts, none decisive alone, can add up under the second branch.

In Potter, an indefinite administrative suspension was found to be constructive dismissal; the Court pointed to the open-ended length, the employer's lack of good faith and its hidden plan to end the employment. The Court said that for an administrative suspension, the employer has to show it was reasonable or justified.

Not every change counts. Small adjustments, changes the contract allows, and changes the employee clearly agrees to are usually fine. The employee also has to act within a reasonable time; staying on for a long time without objecting can be seen as accepting the change.

To lower the risk: read the contract before changing terms, explain the reason, give advance notice of a major change, consider offering something in return, and put any agreement in writing. If a change is big, get advice first.

Constructive dismissal by province

Constructive dismissal is a common-law idea everywhere outside Quebec, but some statutes also recognize it.

Where the work is done	The rule
Federal	A constructive dismissal can support an unjust dismissal complaint. The 90 days to complain run from when the employer changed the terms and conditions of employment.
Alberta	If proper written notice of a temporary layoff is not given, the province says the employee may have been unjustly or constructively dismissed.
Ontario	If the employer constructively dismisses an employee and the employee resigns within a reasonable time, the ESA treats it as a termination, so notice or termination pay is owed.
Nova Scotia	If an employer breaches an employee's terms and conditions of employment, the Labour Standards Code allows the employee to quit without giving notice.

Quebec handles these situations under its own Civil Code and labour standards; check with the CNESST.

Example: A pay cut at a Regina flooring company

Darren runs a 10-person flooring business in Regina. Sales drop, so he tells his salaried estimator, who has been there 6 years, that her pay will go from $70,000 to $55,000 next month. Her contract says nothing about pay changes.

A cut of that size to an essential term, imposed without agreement, risks a constructive dismissal claim. Darren pauses, talks to her about the numbers, and they agree in writing on a smaller temporary reduction with a review date in 3 months.

Hollis drafts the letter

Hollis drafts province-specific letters for you to review, which helps you put a proposed change, its reason and any agreement in writing.

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Questions about constructive dismissal

What counts as constructive dismissal in Canada?

A substantial unilateral change to an essential term, such as pay, duties, hours or location, or conduct that shows the employer no longer intends to honour the employment contract.

Can a suspension be constructive dismissal?

Yes. In Potter (2015), the Supreme Court of Canada found an indefinite administrative suspension without good reason was constructive dismissal.

Does the employee have to quit to claim constructive dismissal?

Usually yes, and within a reasonable time. Staying on for a long time without objecting can be treated as accepting the change.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.