Constructive Dismissal Defined

Two decisions of the Supreme Court of Canada, Farber v. Royal Trust Co.1 and the 2015 decision Potter v. New Brunswick Legal Aid Services Commission2 set out the law of constructive dismissal in Canada.

In Farber, the Court defined a constructive dismissal as follows at paragraphs 24-26:

Where an employer decides unilaterally to make substantial changes to the essential terms of an employee’s contract of employment and the employee does not agree to the changes and leaves his or her job, the employee has not resigned, but has been dismissed. Since the employer has not formally dismissed the employee, this is referred to as “constructive dismissal”. By unilaterally seeking to make substantial changes to the essential terms of the employment contract, the employer is ceasing to meet its obligations and is therefore terminating the contract. The employee can then treat the contract as resiliated for breach and can leave. In such circumstances, the employee is entitled to compensation in lieu of notice and, where appropriate, damages.

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