Constructive dismissal

Constructive dismissal is a claim that the employer, without formally firing anyone, changed the job so much that the employment was in effect ended. A buyer can meet it after closing if the new owner changes pay, hours, work location or reporting lines. A seller can meet it if staff resign and say the sale changed their job.

How the rules describe it

Ontario’s Ministry of Labour guide to the Employment Standards Act gives a significant reduction in salary, or a significant negative change in work location, hours, authority or position, as examples. It calls the subject complex and difficult, and notes that even a lay-off meant to be temporary may be a constructive dismissal if the employment contract does not allow it. In British Columbia, section 66 of the Employment Standards Act says that if a condition of employment is substantially altered, the director may determine that the employment has been terminated. Other provinces and territories run their own regimes.

What to check or ask

• Which changes to pay, hours, location or authority are planned for after closing
• Whether each employee’s contract allows the change, or whether the employee must agree to it
• Whether the seller has received resignations that blame a change in terms
• What an employment lawyer in the employee’s province says about a specific change before it takes effect

For the sale-specific question, read can changing employees’ terms after I buy a business be constructive dismissal. The related term just cause covers dismissals an employer justifies by an employee’s conduct.