A breach of employment contract happens when an employer or employee fails to follow a term of their employment agreement.
For employees, common problems include unpaid compensation, major changes to pay or duties, failure to provide promised benefits, or an employer ending employment without providing the notice or compensation required by the contract and the law.
Not every breach means you should quit. Some breaches can be fixed or compensated. But a serious breach that fundamentally changes your employment can amount to constructive dismissal and give you the right to full severance pay.
On This Page:
- 1. What a Breach of Employment Contract Means
- 2. Common Examples
- 3. Changes to Your Job
- 4. Constructive Dismissal & Severance
- 5. Compensation for a Breach
- 6. What Employees Should Do
What Is a Breach of Employment Contract?
A breach occurs when one side does not do something the employment contract requires, or does something the contract does not allow.
Your employment agreement can include much more than the document you signed when you were hired. The terms of your employment can also be affected by later agreements, compensation plans and rights the law automatically provides.
For the broader rules on how employment agreements work, see our guide to employment contracts in Canada.
Does every workplace disagreement breach your contract?
No. An unfair decision or workplace disagreement is not automatically a breach of contract.
You first need to identify the term your employer was required to follow. For example, a disagreement over management style is different from an employer refusing to pay a bonus that the contract requires.
The seriousness of the breach also matters. A small error that is quickly corrected is very different from a permanent 25% pay cut imposed without your agreement.
Common Examples of Breach of Employment Contract
An employer can breach an employment contract by failing to provide agreed compensation or by making changes that the agreement does not allow.
Examples can include:
- Failing to pay agreed salary, commissions or bonuses
- Removing contractual benefits
- Reducing salary without contractual authority or agreement
- Making a major change to job duties or status
- Moving an employee to a substantially different location when the contract does not permit it
- Making a major unwanted change to hours or schedule
- Temporarily laying off an employee where the employer has no contractual right to do so
- Ending a fixed-term agreement early contrary to its terms
- Failing to provide the termination notice or compensation the employee is legally owed
Whether something is actually a breach depends on what your agreement says and the law that applies where you work.
What if your contract allows the employer to make changes?
A clear and enforceable contract can give an employer some flexibility to change parts of your job.
For example, an agreement can allow reasonable changes to duties, reporting relationships or work location.
But a flexibility clause does not automatically give your employer unlimited power. The wording matters, and the employer still has to act within the rights the contract actually provides.
Can Your Employer Change Your Employment Contract?
Your employer can propose new terms, but it can’t automatically impose every major change simply because it wants to change the deal.
A small adjustment to your duties is different from a major pay cut, demotion or permanent loss of responsibility.
Before deciding whether a change breaches your contract, look at:
- What your contract says
- How significant the change is
- Whether you agreed to it
- Whether the employer has contractual authority to make it
- Whether the change affects a fundamental part of your job
What if you continue working after the change?
Don’t stay silent if your employer makes a major change you do not accept.
Continuing to work under new terms without objecting can eventually make it harder to argue that you rejected the change.
You do not normally need to make an immediate decision on the spot. Put your concerns in writing and get advice before agreeing, resigning or allowing the situation to continue indefinitely.
When Does a Breach Become Constructive Dismissal?
A serious breach can become constructive dismissal when the employer fundamentally changes the employment relationship without the employee’s agreement.
Common examples include a substantial pay cut, serious demotion, major loss of duties or another fundamental change to an important term of employment.
Not every breach reaches that level. The key question is whether the change is serious enough that the employer has effectively broken the employment relationship.
If the legal test is met, you can treat the employment relationship as terminated and pursue the compensation you would have received if your employer had formally dismissed you.
Can you get severance if your employer breaches your contract?
Yes, if the breach is serious enough to amount to constructive dismissal.
You can then pursue your full termination compensation rather than leaving as an ordinary resignation.
If you are terminated or constructively dismissed, don’t sign a release before having your full severance package reviewed—you may be owed as much as 24 months’ pay.
What Compensation Can You Get for Breach of Employment Contract?
Compensation for breach of an employment contract is intended to cover the financial loss caused by the employer’s failure to follow the agreement.
The amount depends on what was breached.
For example:
- If agreed compensation was not paid, the claim can involve the unpaid amount.
- If a contractual bonus was improperly denied, the bonus value can be part of the claim.
- If a serious breach caused constructive dismissal, compensation can include full severance.
- If the employer formally terminates you without providing proper notice or compensation, you can have a wrongful dismissal claim.
The goal is not to give an employee a windfall. It is to compensate for the loss caused by the breach.
Can you sue your employer for breach of contract?
Yes. An employee can pursue a breach-of-contract claim when the employer fails to honour an enforceable contractual obligation and the employee suffers a loss.
But court action is not always the first or best step. Some disputes can be resolved by raising the problem, demanding payment or negotiating a solution.
Legal deadlines apply, and they differ depending on the province and the type of claim. Don’t leave a serious contract dispute unresolved indefinitely.
What Should You Do If Your Employer Breaches Your Contract?
If your employer breaks your employment contract, protect your position before resigning or accepting the change.
- Read the contract. Identify the term you believe the employer has broken.
- Keep your documents. Save your contract, offer letter, compensation plans, emails and documents showing the change or unpaid amount.
- Object to a major unwanted change. Put your concern in writing rather than silently accepting new terms.
- Don’t resign yet. First determine whether the breach creates constructive dismissal rights.
- Calculate what you have lost. This can include unpaid compensation or, if your job effectively ended, full severance pay.
- Get the contract reviewed. A clause that appears to support your employer’s position is not automatically enforceable.
If the problem starts with a new or unclear agreement, our guide to employment contract review explains the clauses employees should examine most carefully.
Breach of Employment Contract FAQs
Can your employer reduce your pay if your contract states your salary?
A substantial unilateral pay cut can breach your employment contract and can amount to constructive dismissal.
Whether a particular reduction crosses that line depends on the size of the cut, your contract and the surrounding circumstances. Don’t accept or resign over a major pay reduction before getting advice.
Can your employer fire you for breaching your contract?
An employee’s breach does not automatically give an employer just cause to fire them without severance.
Just cause is a high standard. The seriousness of what happened and whether the employment relationship has actually broken down must be considered.
Being told you were fired “for cause” does not make the allegation legally valid.
Does a breach make the entire employment contract invalid?
No. A breach does not automatically cancel every term in the employment agreement.
The remedy depends on the term that was broken and how serious the breach is. A fundamental breach can give the employee much stronger rights than a minor breach.
Get Help With a Breach of Employment Contract
When an employer breaks an employment agreement, the biggest mistake is often reacting before you know what the breach means.
Samfiru Tumarkin LLP helps non-unionized employees enforce employment agreements, challenge major unwanted changes, recover unpaid compensation, determine whether a breach amounts to constructive dismissal, and secure the full severance pay and compensation they are legally entitled to receive.
If your employer has cut your pay, changed your job, withheld compensation or ended your employment, get advice before resigning, accepting the change or signing a release.
For contract-specific assistance, speak with our employment contract lawyers in Toronto or employment contract lawyers in Calgary.