🇬🇧🇺🇸 CA · Employment Law · Updated 2026-06-27
What is constructive dismissal in Canada?
Constructive dismissal in Canada occurs when an employer makes a fundamental, unilateral change to an employee's terms — such as cutting salary, changing job duties, or relocating them — entitling the employee to treat themselves as dismissed and claim reasonable notice pay.
Constructive dismissal in Canada arises where an employer unilaterally makes a fundamental change to an essential term of the employment contract. The employee may treat themselves as dismissed without actually resigning, and claim pay in lieu of reasonable notice. Common examples include: a significant salary reduction (10%+ is typically considered fundamental), a material demotion, relocation to a new city, or a dramatic change in duties and responsibilities.
The leading Supreme Court of Canada case is Farber v Royal Trust (1997). The test is objective: would a reasonable person in the employee's position conclude that the employer had fundamentally altered the contract? The employee must not condone the change (by working under the new terms without protest for too long) or the right to claim constructive dismissal may be waived.
If you are constructively dismissed, you should act promptly — protest the change in writing, take advice, and ideally leave within a reasonable time. Courts have found that working under changed terms for months without objection can constitute acceptance. Remedies are the same as wrongful dismissal: common law reasonable notice pay.
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