Employment law
Constructive Dismissal in Ontario: The Test, Examples and What to Do
What counts as constructive dismissal in Ontario, how courts apply the Potter and Farber test, how it differs from wrongful dismissal and firing for cause, and the steps to take before you quit.
Constructive dismissal in Ontario happens when your employer, without your agreement, makes a substantial change to a fundamental term of your job, such as a major pay cut or a significant change to your duties, hours or work location, or treats you in a way that shows it no longer intends to keep the employment contract [1][4]. If you resign in response within a reasonable time, the law treats you as dismissed, so you may be owed termination pay, severance or common law damages [1][2]. Whether a change is serious enough is judged objectively, not by how upset you feel [4][6].
Key takeaways
- In Ontario, constructive dismissal happens when an employer, without the employee's consent, substantially changes an essential term of the job (such as pay, duties, hours or location) or acts in a way that shows it no longer intends to honour the employment contract.
- The Supreme Court of Canada's test, from Farber v. Royal Trust (1997) and Potter v. New Brunswick Legal Aid Services Commission (2015), is objective: would a reasonable person in the employee's position see the change as substantial?
- Under the Employment Standards Act, 2000, a constructively dismissed employee who resigns within a reasonable time is treated as terminated and can be owed termination pay and, if eligible, severance pay.
- Many employees are entitled to common law reasonable notice that is longer than the ESA minimum, but you cannot both sue for wrongful dismissal and file an ESA claim for the same termination.
- Deadlines are short: an ESA claim generally must be filed within two years, and a court claim is subject to the two-year limitation period in Ontario's Limitations Act, 2002.
This guide explains the legal test, gives common examples, compares constructive dismissal with wrongful dismissal and firing "for cause", and sets out practical steps and deadlines. It is general information about Ontario law as of November 2026, not legal advice.
What is constructive dismissal in Ontario?
Constructive dismissal is a dismissal in substance even though nobody said "you're fired". Ontario's Ministry of Labour describes it as an employer making a significant change to a fundamental term or condition of employment without the employee's consent [1]. Examples the ministry gives include a major pay cut, or a significant negative change to work location, hours, authority or position [1].
The ministry also lists harassment or abuse, and an ultimatum to "quit or be fired" that leads the employee to resign [1]. Under the Employment Standards Act, 2000 (ESA), the employee must resign within a reasonable time for the situation to count as a termination [1].
Federally regulated workers fall under different legislation. This guide covers provincially regulated Ontario employees.
What is the legal test for constructive dismissal?
Two Supreme Court of Canada decisions set the test that Ontario courts apply.
Farber v. Royal Trust (1997)
David Farber ran a regional office for Royal Trust. After a reorganization, he was offered a branch manager job at one of the least profitable branches, with no guaranteed base salary, and he expected his income to drop by about half [6]. The Court unanimously found he had been constructively dismissed and awarded $150,000, equal to one year's pay in lieu of notice [6]. The Court said the test is objective: whether a reasonable person in the employee's position would have seen the essential terms of the contract as substantially changed [6].
Potter v. New Brunswick Legal Aid Services Commission (2015)
In 2015 SCC 10, the Court confirmed that constructive dismissal can take two forms [4][5]:
- A single change. The employer makes a unilateral change that breaches an express or implied term of the contract, and that breach substantially alters an essential term. The court decides objectively whether a breach occurred, then asks whether a reasonable person in the same situation would have felt the essential terms were substantially changed [4][5].
- A course of conduct. Even without one specific change, a series of acts can amount to constructive dismissal if it would lead a reasonable person to conclude the employer no longer intends to be bound by the contract [4][5]. The Court noted that an employee can succeed where the employer's treatment made continued employment intolerable [4].
The burden is on the employee to prove constructive dismissal [4]. In Potter itself, the employee was suspended indefinitely with pay and his duties were reassigned. The Court found the suspension was not authorized by his contract, and given its indefinite length and the lack of explanation, it was a substantial change, so he had been constructively dismissed even though he was still being paid [5].
What are common constructive dismissal examples?
Every case turns on its facts, including what your contract says and how big the change is. The table below is a rough guide based on the factors the courts and the ministry describe [1][4][5][6].
| Scenario | Likely, maybe or unlikely? | Why |
|---|---|---|
| Large cut to base salary imposed without your agreement | Likely | Pay is an essential term; the ministry names a major pay cut as an example [1] |
| Demotion to a lesser role with lower guaranteed pay | Likely | This was essentially the situation in Farber [6] |
| Indefinite suspension with no contractual right or explanation | Likely | The Supreme Court found this in Potter, even with pay continuing [5] |
| Ongoing harassment or abuse the employer allows to continue | Likely to maybe | Harassment can qualify; conduct must make continued work objectively intolerable [1][4] |
| Moving your workplace to a distant city | Maybe | Depends on distance, your contract and whether relocation was expected [1] |
| Major change to hours or shifts | Maybe | A significant negative change to hours is listed by the ministry; small adjustments usually are not [1] |
| Reduced authority, title or reporting line | Maybe | Turns on how substantial the loss is to a reasonable person [1][6] |
| Minor change to duties within your job description | Unlikely | Changes the contract allows are not a breach [6] |
| Small, temporary change your contract expressly permits | Unlikely | No breach of an express or implied term [4][5] |
How is constructive dismissal different from wrongful dismissal?
Wrongful dismissal usually means your employer ended your job without giving you enough notice or pay in lieu of notice. Constructive dismissal is one way that can happen: the employer does not fire you outright, but its conduct amounts to a termination. In both situations, the question becomes how much notice or pay you were owed.
Two sources of entitlement matter in Ontario:
- ESA minimums. Employees with at least three months of continuous service are entitled to written notice or termination pay. It is one week if you worked less than a year, two weeks for one to three years, then one week per year of service, up to eight weeks at eight or more years [1]. Severance pay is a separate entitlement for employees with five or more years of service whose employer has a global payroll of at least $2.5 million or cut 50 or more jobs in six months because of a closure. It equals one week of regular wages per year of service, to a maximum of 26 weeks, and it applies to constructive dismissal too [2].
- Common law reasonable notice. Unless a valid contract says otherwise, courts award what is "reasonable", which is often more than the ESA minimum [10]. The classic factors, from Bardal v. Globe and Mail (1960), are the character of the employment, length of service, age, and the availability of similar employment given your experience, training and qualifications [9]. Steps to Justice adds that a highly specialized role or being recruited away from a secure job can increase notice [10].
A termination clause in your contract can limit you to the ESA minimum. But if the clause could give you less than the ESA requires or is unclear, a court may not enforce it [10]. Have a lawyer read it.
What does termination "for cause" mean?
An employer that has just cause can dismiss an employee without common law notice. Examples Steps to Justice gives include theft, intentional damage to property, threats or assault, and refusing an important part of your job without a good reason [11]. Even if you did something wrong, an employer may not have cause if the misconduct was not very serious, you had no chance to correct it, or you had long service [11].
The Supreme Court's decision in McKinley v. BC Tel (2001) requires courts to look at misconduct in context and ask whether it caused a breakdown in the employment relationship [12]. That contextual approach applies to all alleged causes, not only dishonesty [12].
The ESA has its own, separate standard. Its notice and termination pay rules do not apply to an employee guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer, and careless or unintentional poor performance generally does not meet that standard [1]. Because the tests differ, a lawyer will look at both.
What should you do if you think you've been constructively dismissed?
Timing and paper trail matter more than almost anything else.
Don't quit too fast
Resigning is a one-way door. If a court later decides the change was not substantial, your resignation may stand as a voluntary quit, and you could lose any claim to notice. Speak to an employment lawyer before you resign.
Object in writing
When an employer imposes a change, you generally have three options, as summarized in commentary on the Ontario Court of Appeal's 2008 decision in Wronko v. Western Inventory Service [7]:
- Accept the change, expressly or by conduct, in which case the new terms apply.
- Refuse the change and treat it as a dismissal, and sue for constructive dismissal if the employer insists.
- Refuse the change and keep working. If the employer lets you continue, your original terms continue to govern [7].
People often call the third option working "under protest". Whatever you choose, put your objection in writing promptly, keep copies, and avoid conduct that suggests you have accepted the change. The ESA also requires a constructively dismissed employee to resign within a reasonable time for the resignation to count as a termination, so delay can hurt [1].
Keep records
Save your contract, offer letter, pay stubs, performance reviews, the employer's notice of the change, and dated notes of key conversations. If the issue is harassment, keep a log of incidents and any complaints you made.
Understand your duty to mitigate
If you do leave, you are expected to take reasonable steps to reduce your losses, usually by looking for comparable work. Keep a record of your job search [10]. In Evans v. Teamsters Local Union No. 31 (2008), the Supreme Court held that the mitigation duty applies to constructive dismissal as well as wrongful dismissal, and that in some situations a reasonable person would be expected to accept an offer to keep working for the same employer during the notice period [8].
Should you file an ESA claim or sue in court?
You must pick one route for the same termination. The Ministry of Labour says you cannot both sue for wrongful dismissal and file an ESA claim; you "must choose one or the other" [1]. If you file an ESA claim and change your mind, you must withdraw it within two weeks of filing to go to court [3].
An ESA claim is filed with the Ministry of Labour, which assigns an officer to investigate. It deals with ESA entitlements such as termination and severance pay, and the ministry notes that some employees have common law rights that exceed those amounts [1][3].
A civil claim for wrongful or constructive dismissal can recover common law reasonable notice, which is often larger [10]. Claims of up to $50,000 can go to Small Claims Court, after the limit rose from $35,000 on October 1, 2025 [14]. Larger claims go to the Superior Court of Justice.
The right choice depends on your length of service, your contract and the size of your likely entitlement. That is a good question to bring to a first consultation.
What are the deadlines for constructive dismissal claims?
- ESA claim: generally within two years of the alleged violation [3].
- Lawsuit: generally within two years under section 4 of Ontario's Limitations Act, 2002 [13].
Courts enforce these deadlines strictly. In Brady v. Waypoint Centre for Mental Health Care (2025 ONCA 722), the Court of Appeal upheld the dismissal of a wrongful dismissal claim issued about six weeks late, said the Limitations Act did not allow the discretionary relief the employee sought, and ordered her to pay $25,000 in costs [13]. Count from the earliest possible date and do not leave it to the last month.
How much does an employment lawyer cost?
Fees vary. Many employment lawyers offer a short initial consultation, and some work on contingency, taking a percentage of what you recover. In Ontario, contingency fees are allowed in civil and tribunal matters where a client may receive money, but not in family or criminal matters. Lawyers generally must use the Law Society's standard form agreement, firms that advertise contingency fees must disclose their maximum percentage, and the fee cannot exceed what you receive [15]. Others bill hourly or charge a flat fee for a contract review or demand letter.
Litigation also carries costs risk. In Ontario courts, a losing party can be ordered to pay part of the other side's legal costs, as in the Brady appeal [13]. For a broader breakdown, see our guide to how much a lawyer costs in Canada.
When should you call an employment lawyer?
Get advice as soon as any of these happen:
- Your employer announces a significant cut to pay, a demotion, a relocation or a major change to hours.
- You are suspended without a clear contractual reason or end date.
- You are told to accept new terms or leave.
- You are being harassed and complaints have not fixed it.
- You are asked to sign a new contract, termination clause or release. Steps to Justice advises against signing a release right away and suggests getting legal advice first [10].
- You have already been fired, with or without a claim of cause.
You can browse Ontario employment lawyers or search by city, such as employment lawyers in Toronto and employment lawyers in Ottawa. Our guide on how to find a lawyer in Canada covers what to ask in a first meeting.
Frequently asked questions
What is constructive dismissal in Ontario?+
It is when an employer, without your consent, makes a significant change to a fundamental term of your job, such as a major pay cut or a big change to duties, hours or location, or acts in a way showing it no longer intends to honour the contract. If you resign within a reasonable time, the law treats it as a termination, so you may be owed notice, termination pay or severance.
Can a pay cut be constructive dismissal?+
Yes, if it is substantial and imposed without your agreement. Ontario's Ministry of Labour lists a major pay cut as an example. Courts ask whether a reasonable person in your position would see the change as substantially altering an essential term. A small reduction, or one your contract allows, is less likely to qualify. Object in writing and get advice before resigning.
Should I quit if I think I've been constructively dismissed?+
Not before getting legal advice. If a court decides the change was not substantial, your resignation could be treated as voluntary and you may lose any claim. Options include objecting in writing and continuing to work, which generally keeps your original terms in place if the employer allows it. Waiting too long can also be read as accepting the change, so act promptly.
How much notice am I owed if I'm constructively dismissed?+
At minimum, the ESA amount: one week for under a year, two weeks for one to three years, then one week per year up to eight weeks, plus severance pay if you qualify. Many employees are owed more under common law reasonable notice, based on factors such as age, length of service, the type of job and how hard it is to find similar work.
What is the deadline to sue for wrongful or constructive dismissal in Ontario?+
A lawsuit is generally subject to the two-year limitation period in Ontario's Limitations Act, 2002, and courts enforce it strictly. An ESA claim generally must be filed within two years of the violation. You cannot pursue both for the same termination, and if you file an ESA claim you have two weeks to withdraw it if you decide to sue instead.
Do employment lawyers in Ontario work on contingency?+
Some do. Contingency fees are permitted in Ontario civil and tribunal matters where a client may recover money, but not in family or criminal matters. Lawyers generally must use the Law Society's standard form agreement, and the fee cannot be more than what you receive. Others charge hourly or a flat fee for tasks such as reviewing a contract or severance offer.
This guide is general information, not legal advice. Laws and law society rules change; confirm details with a lawyer or the relevant law society. Spotted something out of date? Email hello@lawyerslist.ca.
Sources
- Your guide to the Employment Standards Act: Termination of employment — Government of Ontario. Accessed November 10, 2026.
- Your guide to the Employment Standards Act: Severance pay — Government of Ontario. Accessed November 10, 2026.
- Your guide to the Employment Standards Act: Filing a claim — Government of Ontario. Accessed November 10, 2026.
- Potter v. Legal Aid Services Commission (N.B.), 2015 SCC 10 (headnote) — vLex Canada. Accessed November 10, 2026.
- The Supreme Court of Canada Clarifies Test for Constructive Dismissal — Bennett Jones LLP. Accessed November 10, 2026.
- Constructive Dismissal Still Under Construction — LawNow Magazine. Accessed November 10, 2026.
- Important Ontario Court of Appeal decision dealing with unilateral changes to the terms of employment — Blake, Cassels & Graydon LLP (via Legal 500). Accessed November 10, 2026.
- Evans v. Teamsters Local Union No. 31: Significantly Altering the Employer-Employee Power Balance? — TheCourt.ca (Osgoode Hall Law School). Accessed November 10, 2026.
- The New Bardal Factors May Just Be the Old Bardal Factors — Slaw. Accessed November 10, 2026.
- I've been fired. How much notice should I get? — Steps to Justice (CLEO). Accessed November 10, 2026.
- Can I be fired without any notice? — Steps to Justice (CLEO). Accessed November 10, 2026.
- So what exactly constitutes just cause? — Canadian HR Reporter. Accessed November 10, 2026.
- Ontario Court of Appeal upholds denial of wrongful dismissal claim deemed untimely — Law Times. Accessed November 10, 2026.
- Ontario Small Claims Court limits increased to $50,000 — LAWPRO (practicePRO). Accessed November 10, 2026.
- No win, no fee: How contingency fees work in Ontario — Law Times. Accessed November 10, 2026.
