Potter v. New Brunswick Legal Aid: The Test for Constructive Dismissal

The case

Mr. Potter was the executive director of New Brunswick's legal aid commission, on a ten-year appointment. During discussions about buying out his contract, he went on sick leave. The commission then told him not to return to work until further notice, kept paying him, and, without telling him, had recommended to the government that his appointment be ended. He treated this as constructive dismissal.

The Supreme Court agreed. An employer's power to suspend with pay is not unlimited: it must be authorized by the contract or justified by legitimate business reasons, and the employer must act in good faith. Indefinitely suspending him without reasons, while working towards his termination, was a substantial breach.

The two branches

1. A single unilateral act that breaches an essential term: identify the change, then ask whether a reasonable person in the employee's situation would feel that the essential terms were being substantially changed. Examples include a large pay cut, a demotion, or a major change to duties or location not allowed by the contract.
2. A series of acts that, taken together, show the employer no longer intends to be bound by the contract, such as a toxic or abusive work environment the employer allows to continue.

Practical points

• Raise your objection in writing promptly. Staying in the changed job for a long time without objecting can be treated as acceptance.
• Keep records: emails, pay stubs, job descriptions before and after, and notes of meetings.
• If the claim succeeds, damages are usually measured like a wrongful dismissal: reasonable notice, subject to mitigation.
• If it fails, the employee may be found to have resigned, with no entitlement to notice.

Common questions

Is a small pay cut constructive dismissal?

Not usually. The change has to be substantial. Courts have often found cuts of around 10 percent or less not enough on their own, but every case turns on its facts.

Can I keep working while I object?

Sometimes an employee can work under protest for a short time while making clear they don't accept the change. Get advice early, because timing matters.

Photos from Pexels: A Lady Justice statue holding the scales · Law books on a library shelf.

This article is general information for people in Ontario, not legal advice. Rules, forms and deadlines change, and every situation is different. Check the current rule or speak to a licensed legal professional before you act.