‘They think they have the right to dictate things’

"A common mistake is employers believing they have the right to dictate to employees more than they actually do," says Aaron Zaltzman, associate lawyer at Whitten & Lublin.

"The concept of constructive dismissal is built on the idea that they do not."

Recently, a Saskatchewan employer facing such a claim was vindicated. While the employee claimed that a change in benefits provider and pay schedule added up to constructive dismissal, the provincial labour board disagreed, calling them minor changes.

But the case highlights the perils for employers and HR when making changes in the workplace.

There are definitely ways the issue can be managed better, says Paulette Haynes, founder of Haynes Law Firm.

“People may allege all kinds of things, but there may be some things that employers can do to minimize the risk of a successful claim of constructive dismissal.”

Fundamental changes in a job

Constructive dismissal occurs when an employer unilaterally makes a fundamental change to the terms and conditions of employment — one that "a reasonable person in the position of the worker might think is really hitting at the essential terms and conditions of work," says Haynes.

One of the most common problems is that employers don't recognize when their actions cross the line, according to Zaltzman.

“They sometimes think they have the right to dictate things without realizing they're changing a term of employment.”

For example, most employers understand that cutting someone's pay in half is probably constructive dismissal, he says, but things like significantly changing bonus structures — or requiring someone who has been working remotely to start coming into the office — can also qualify.

Another misconception is that a business decision made in good faith is somehow exempt.

"Good faith or bad faith, it doesn't matter to the determination," says Zaltzman. "And I've also seen employers say, 'Well, everyone else accepted this change and you're the only one who hasn't' — as if that means it can't be constructive dismissal."

Getting employee consent

The general principle is if the employer feels they must make fundamental changes to essential terms and conditions of employment, they should put the employee on notice in writing and get the employee's consent, she says.

“The employee can say no. If that's the case, maybe the employer should be looking at properly terminating the employee without cause. That should be the last resort — the employer should try other ways to reach a resolution first.”

That said, giving proper notice of a fundamental change does help. Since constructive dismissal is treated like a termination, HR can give notice of the change as long as it matches what the employee would be entitled to on termination, says Zaltzman.

“It needs to be very clear and unambiguous, and the employee can still decide whether to accept it or not.”

Percentages: cutting salaries

When business pressures force compensation reductions, employers will want to know how far they can go. There is no hard-and-fast rule, says Zaltzman, but an Ontario case has given rise to what he calls "the 10-20 idea."

"Compensation reductions under 10% are generally not going to be considered constructive dismissal on their own; reductions over 20% generally will be. Anything between 10 and 20% requires looking at other contextual factors," he says, adding that these are not strict court rules.

"I don't want employers thinking they can cut pay by 9.5% and everything will be fine — obviously, the less the reduction, the better."

Haynes frames it in similar terms. If an employer needs to reduce pay by 30%, she says, "number one, you need to let the employee know, because that is generally going to be seen as a significant change to the essential terms of the employment contract."

The employee may refuse — and if so, "the employer may have the option of terminating without cause,” she says.

The flip side is if an employee agrees to the reduction, they may lose the ability to rely on it. "By virtue of the fact that she consented, she condoned it," says Haynes.

On the question of an increasing workload, Zaltzman notes that asking someone to do more work for the same pay essentially lowers their overall rate of compensation — and that can also add up to constructive dismissal.

Remote work considerations

Return-to-office mandates have become a common constructive dismissal triggers in recent years, and Zaltzman says employers frequently misread their own position.

Simply having an employee acknowledge a change is not enough — to alter a fundamental term, the employer needs genuine agreement and consideration, meaning something given in exchange, such as a signing bonus, he says.

“Just having an employee acknowledge a change isn't really an agreement — from the court's perspective, it's more like agreement at gunpoint.”

On geographic changes, Haynes draws a similar line. Moving an office from one part of a city to another may be manageable, she says, but if the original employment contract never contemplated it, that's a different story.

"Major geographic changes have to meet the test: is this change so significant that it represents a fundamental change to the employment contract?"

Unwritten agreements

More importantly, what is written in the original employment contract is not the final word, according to Zaltzman.

"If an employment agreement from five years ago says in office but the employee has been working remotely for five years, a court will likely say that person is now a remote worker," he says.

The same logic applies to compensation: if a contract states $70,000 but raises have brought the employee to $100,000, the employer cannot simply revert to the contract figure.

“Changes that happen over time — in compensation, duties, titles, remote arrangements, incentive structures — can all become part of the employment agreement,” says Zaltzman.

Job changes, demotions and AI

Changes to duties — even those that aren't objectively negative — can also qualify. Zaltzman offers the example of an accountant told their new role is marketing specialist, at the same level and pay: "You can take that as a constructive dismissal," he says.

Informal demotions are equally real, even without a compensation change. If an employee's title and pay remain the same but they are now reporting to someone who was previously their peer or direct report, courts recognize that as a potential trigger, says Zaltzman.

"A formal or informal demotion, even without a compensation reduction, can absolutely qualify."

Haynes agrees that significant downgrades in responsibility, authority and status can trigger a constructive dismissal claim.

“A lot of times, employers have job descriptions, and when drafting those, I'd say don't make them so tight that minor tweaks to duties automatically become an issue — those minor changes may not be considered constructive dismissal.”

But an emerging scenario is more pointed when it comes to job changes, says Zaltzman.

"We've seen employers telling employees their new job is to train AI agents," he says. "From my point of view, that's a constructive dismissal trigger for a couple of reasons: one, you're completely changing someone's duties; and two, you're essentially telling them they have to train their own replacements, which is on some level a breach of the fundamental trust necessary for an employment relationship."

Human rights and constructive dismissal

Haynes flags workload increases as another area of growing concern.

“The culture changes, people get fired, and all of a sudden there's an increased workload that isn't sustainable. And here's the narrative I often hear: [a worker will] tell her superior, respectfully, that she needs support — and she doesn't get it… then her performance starts to slip and she gets written up — yes, that can feed a constructive dismissal claim.”

Haynes adds that the post-COVID hybrid environment has created new accommodation flashpoints. If a worker's medical team says they need to work from home on certain days because being in the office is not in their best interest, and the employer refuses, "that piece, usually part of a bigger narrative, becomes another sign that the employer is unilaterally trying to change her job. And you're also likely alleging a violation of the duty to accommodate," she says, adding those requests can feed an allegation of constructive dismissal.

On the human rights side, Zaltzman identifies two main categories. The most common is a failure to accommodate a disability-related restriction to the point of undue hardship, which is “100% a potential trigger for constructive dismissal," he says.

The second is overt discrimination within the workplace that isn't being addressed — an issue that, if left unresolved after the employee has raised it, “goes to the heart of the employment relationship,” he says.

Toxic environments and accommodation

Constructive dismissal isn't always about a single dramatic change, according to Haynes.

“There's a history, a pattern of behaviour. As you start to connect the dots, that's where the employee may say, ‘I think I'm being constructively dismissed.’”

A poisoned work environment is one such pattern. She describes a scenario where a long-tenured employee with no prior performance issues may encounter a new manager, so the culture changes, micromanagement begins, and the employee is eventually placed on a performance improvement plan.

"That's one example of how a poisoned work environment allegation can build — unilateral changes significantly impacting the work environment," she says. “The employee claims the employer's conduct creates a situation where they simply cannot continue to work.”

There is, she notes, "an implied duty on the employer to treat the employee in good faith," alongside legislation that speaks to safe environments, including occupational health and safety legislation.

Zaltzman agrees about the obligation to provide a safe, non-toxic work environment — and it does not require an entire group to be affected, he says.

"If there's a more people affected, that might point to a larger breach, but ultimately the employer is obligated to step in and make the environment safe.

“If they fail — whether intentionally, negligently or because they're unwilling to act against the person creating the toxic environment — they're in breach of that fundamental duty.”

Condonation: when silence becomes acceptance

Employees who don't immediately object to a change are not necessarily without recourse — but time matters. Zaltzman explains a concept called condonation, where after a certain period, an employee may be considered to have accepted the change.

Employees facing a fundamental change have three options, he says: accept it, reject it or work under protest. Simply not objecting can be deemed passive acceptance.

However, courts have recognized a trial period — the right to try out changes for a reasonable time before deciding.

"A 75% salary cut — you don't need long to figure out if you're accepting that," says Zaltzman. "But something more gradual, like different duties or a new bonus structure, you have the right to try it out and then decide whether to accept, reject or protest."

Clear communication needed

The advice both offer is consistent: if a fundamental change is necessary, communicate it clearly and in writing, give proper notice, and seek genuine consent. If the employee refuses, termination without cause — not just cause — may be the appropriate outcome.

“From the employer's side, if any of these changes are being made in good faith because circumstances necessitate it — always communicate those changes. Put the employee on notice in writing,” says Haynes.

“If you can get their consent, great. But if the employee won't consent and the employer truly has no other choice, then maybe they're looking at terminating without cause. An employee who doesn't consent is not a sufficient basis to terminate for just cause.”

Zaltzman says it’s important for employers to remember that an employment relationship is a contractual relationship between two parties.

 “It's not a fiefdom, it's not a debt of loyalty," he says. "There are two parties entering into a contract, and the employer has obligations to uphold their side of it. If they don't, the employee has remedies."