Constructive dismissal is a doctrine that states when an employer unilaterally and drastically alters the terms of an employee’s employment, the employee is entitled to quit their job and sue the employer from wrongful dismissal. In other words, an employer is not allowed to unilaterally change an employment contract, unless the employee explicitly accepts. If an employer continues to work even after the drastic change, this does not necessarily constitute acceptance. Bad faith is not a requirement for an employer to commit a repudiatory breach (Farber v. Royal Trust).
Even if an employment contract is in writing, sometimes the court will ignore certain terms of the contract. The court is cognizant of the inherent inequality in bargaining power between an employer and an employee (Nardocchio v. CIBC). This Is particularly true if the contract contains terms that are unfair or provide grossly inadequate consideration.
If there is ambiguity in an employment contract regarding reasonable notice, the fairer interpretation will be preferred, and if an indefinite term contract exists there must be reasonable notice according to the common law definition unless the contract meaningfully says otherwise (Ceccol).
When it comes to wrongful dismissal, the main job of the court is to determine what is reasonable notice (i.e. you get paid money to compensate you). This is an implied term of the employment contract as per common law. There are two main approaches to determine reasonable notice. The oft-cited Bardal approach where the court considers such factors as the character of employment, length of service of the servant, age of the servant and availability of similar employment (most important) having regard to the experience, training, and qualifications of the servant. The Bardal approach is augmented with by the Lazarowicz approach, approved by the SK QB in Bartlam. Here, the court imagines that the employer and the employee had sat down at had a chat at the time the employee was hired. How much of a notice period would they have agreed upon? This approach is useful because it takes it flexibly takes into account factors such as the economic situation, norms of the industry and so on.
As per common law, there are certain terms that are implied to be in all employment contracts. Most notably, reasonable notice for wrongful dismissal. There is a rebuttal presumption that such a right exists, unless the employer can show evidence that the parties agreed otherwise. Based on the inherent power imbalance between employers and employees, ambiguous terms of employment contracts will be interpreted in a way that is favourable to the employee (Ceccol). An implied term is something that the employer and employee would have agreed to if they had sat down and had a chat at the beginning of the employment relationship (McNamara).
The rules of employment contracts are similar to the rules of contract in general. For example, as per the freedom of contract, one is fully entitled to choose whether or not they want to enter into a contract. This applies to employment contracts as well. Employers are free to decide whether or not they want to enter into a contract with you i.e. hire you. Just like in regular contracts, the principles of offer, acceptance, consensus ad idem, etc are necessary to form an employment contract. An employer cannot unilaterally impose a contractual term onto an employee.
The common law contract of employment only applies to employees. Independent contractors are not subject to the common law protections of the common law contract of employment (because it is believed that independent contractors are better situated economically to protect their own interests). Thus the first threshold question is often to determine if the plaintiff is an employee. The leading test to distinguish employees from independent contractors is the Montreal v. Montreal Locomotive Works Test: