Silence Does Not Equal Condonation - Ontario Temporary Layoff

Does an Employee’s Silence Always Amount to a Condonation of a Temporary Layoff? Ontario Court Says “No”.

In a recent decision, the Ontario Court of Appeal found that an employee’s failure to object or speak up after his employer placed him on an unpaid temporary layoff did not amount to a condonation. As a result, the employer did not have legal consent for the temporary layoff, resulting in the employee’s successful claim of constructive dismissal, entitling to a financial severance package consisting of severance pay under common law.

What Happened in this Case?

A 51 year-old employee had worked for the employer for nearly 20 years. During the onset of the COVID-19 pandemic on March 23, 2020, the employee’s plant manager provided him with a letter (which he signed) informing him that he would be placed on an unpaid temporarily laid off for 13 weeks with the hope of recalling him back to work by June 19, 2020. (On a side note: this is the period of time allowed under the Ontario Employment Standards Act, 2000 without providing any salary as long as it continues health benefits plans, assuming he had signed an employment contract permitting the temporary layoff in the first place).

On June 2, 2020, the employer extended the employee’s temporary layoff for a period of “up to 35 weeks”.. and again on September 23, 2020… and again on December 9, 2020 until September 4, 2021. Finally, in December 2020, the employee consulted an employment lawyer. On December 22, 2020, the employee’s lawyer wrote to the employer to advise that he was bringing a claim for wrongful dismissal. On December 24, 2020, the employer replied, saying that the employee signed a document agreeing to the temporary layoff, and that it hoped to recall him back to work in a few weeks. After starting his court claim for constructive dismissal, the employer sent the employee a letter recalling him back to work (however, he had already obtained a new job by that time).

In court, the employee brought a claim for wrongful dismissal in court. In response, the employer brought a motion for summary judgment to dismiss the claim on the basis that the employee had agreed to (or condoned) the layoffs because he never objected to being placed on the temporary layoff. At the lower-level trial, the court found in favour of the employer, finding that he was not constructively dismissed and .

What Were the Issues in Dispute?

1. Was there an implied agreement in the employee’s employment contract which permitted the employer to place him on a temporary layoff (specifically because he was aware that many of his co-workers had been laid off in the past)?

2. Did the employee condone the temporary layoffs (and therefore was not wrongfully dismissed) when he: (a) signed the letter given to him when he was laid off; (b) sought legal advice; and (c) failed to protest his the temporary layoffs.

To answer these questions, the Court began by summarizing the law of constructive dismissals in Ontario:

Constructive dismissal can be established by either (i) the employer’s breach of an essential term of the employment contract, or (ii) a course of conduct by the employer that establishes that it no longer intends to be bound by the employment contract.

Absent an express or implied term in an employment agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment contract that constitutes constructive dismissal.

In such cases, an employee has an immediate right to pursue a claim for constructive dismissal.

Where the employment contract has no express term concerning lay offs, a right that an employer may do so will not be readily implied. The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee. “The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”: Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.

1. Was There an Implied Term Permitting the Temporary Layoff?

In this case, the employee’s terms of employment do not expressly permit the respondent to lay him off. Therefore, the question was whether there was an implied term permitting the employer to temporarily lay him off based on its past practice of laying off employees about 10 years prior.

In the Court’s view, the fact that other employees were laid off does not constitute an implied term (or legal basis) in the employment contract allowing the employer to impose a temporary layoff. In other words, the repeating that the layoff of other employees does not imply a contractual term into another employee’s employment contract.

The right of an employer to unilaterally impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation. Furthermore, even though layoffs up to 35 weeks can be permitted through s. 56 of the Employment Standards Act (“ESA”), the ESA does not displace greater contractual or common law rights and protections. In other words, the fact that a layoff was conducted in accordance with the ESA“is irrelevant to the question of whether it is a constructive dismissal”.

2. Did the Employee Condone the Temporary Layoff?

The employer argued that the employee condoned the layoff and, as a result, there was no constructive dismissal. The defence of condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”: Greaves v. Ontario Municipal Employees Retirement Board (1995), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.). In employment disputes, condonation is a defence to a claim of constructive dismissal that must be proven by the employer: McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, 154 O.R. (3d) 451, at para. 24. In McGuinty, Huscroft J.A. for this court held at para. 31 that,

While it may be reasonable to find that an employer’s burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer’s impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal.

In rejecting the employer’s argument, the court found that even if the employee signed the Layoff Letter, there was no evidence that this was any more than a mere acknowledgment of the terms of the layoff.

Second, the fact that the employee contacted an employment lawyer is not evidence that he had knowledge of the consequences of the temporary layoff or consented to the layoff. In fact, the employee received legal advice after the temporary layoff had been extended several times, and days before he asserted his claim for constructive dismissal.

Third, it was not proper for the employer to conclude that the employee’s failure to object to the temporary layoff constituted condonation. When it came to the issue of the employee’s silence regarding the temporary layoffs, it is important to keep in mind the following points:

First, an employee is permitted reasonable time to assess any changes to the terms and conditions of their employment contract before they are forced to take an irrevocable legal position. Put simply, an employee’s silence for a reasonable time period following a fundamental change in their employment contract (such as a temporary layoff) does not equal condonation.As the court noted:

The vulnerability of employees who believe they may have been constructively dismissed and the difficulty of making the life-altering decisions they face must be recognized. In this context, it is understandable that such employees may wish to try to adjust to the new terms and conditions without affirming the employer’s right to make these changes and before taking the radical step of advancing a constructive dismissal claim. Allowing employees reasonable time to assess the new terms before they are forced to take an irrevocable legal position not only addresses their vulnerability, but also promotes stability and harmonious relations in the workplace. For these reasons, I am of the view that the appellants had no obligation to acknowledge [the employer’s] right to change the compensation schedule, and that their failure to do so did not constitute a repudiation of their agreement…

Second, an employee’s condonation in the face of a temporary layoff requires a positive action, such as expressing consent to the layoff or expressing a willingness to work before claiming wrongful dismissal, such that the employer would reasonably believe that the employee consented to the change in the terms of employment: see, for example, the indicia of condonation present in Muntean v. Enablence Canada Inc., 2016 ONSC 923, at paras. 10-13. There is no such evidence here.

Third, there is no requirement for an employee to ask when they might be called back to work before commencing an action for constructive dismissal: Coutinho, at paras. 54-55.

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