Temporary Layoff? Employee Silence is Not Permission or Defence

Ontario Court of Appeal Says Silence Does Not Equal Condonation for Temporary Layoff

In Ontario, many employment lawyers guide both employees and employers with issues of unpaid temporary layoffs, which is a sensitive topic – and rightfully so.

Quite often, we find that employers mistakenly believe that when business is slow (or other economic or non-economic reasons), they believe they have the legal right to tell the employee to stay home and immediately cut off their salary or wages. Worst yet, employers think that somehow the Ontario Employment Standards Act, 2000 permits this to happen as long as they continue the employee’s health and dental plans.

In reality, this is only partially true. However, when it comes to employment law in Ontario, the courts follow an “all-or-nothing” rule, such that unless an employee has voluntarily signed a valid employment contract (which is rarely the case) where the employee has agreed to a temporary layoff taking place during their employment, an employer cannot unilaterally impose a temporary layoff. In those circumstances, the courts will likely find that the employee was constructively dismissed as a result of an unlawful and unauthorized temporary layoff.

Case in Point

In a recent case called Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255, the Ontario Court of Appeal provides us with some guidance in terms of when an employer can successfully assert they had an implied right of temporary layoff that was condoned by an employee and, as a result, will not amount to a constructive dismissal claim by an employee.

Facts

In this case, the employee was a welder who began his employment with Qualified Metal Fabricators (“QMF”) in October of 2000. During his nearly 20-year career with the company, he had never previously been laid off. However, in March 2020 as the global COVID-19 pandemic arose, it decided to temporary lay off nearly 31 of its 140 employees, including Mr. Pham, which it attributed to the company’s financial losses due to the pandemic.

At first the temporary layoff lasted 13 weeks, but it was unilaterally extended by the company for “up to 35 weeks,” and subsequently extended another two times. For his part, Mr. Pham did not object to the temporary layoffs until nine months later in December 2020, when he consulted an experienced employment lawyer in Toronto. After severance package negotiations were unsuccessful, he brought a wrongful dismissal claim.

The employer’s defence to the wrongful dismissal was to bring a summary judgment seeking a dismissal on the grounds that Mr. Pham condoned (accepted and approved) the temporary layoffs, or alternatively, that he had failed to mitigate his damages by not looking for new employment.

At first, the court ruled in favour of the employer and awarded summary judgment and dismissed the wrongful dismissal claim, finding that there was no genuine issue requiring a trial because the employer had an implied right to place Mr. Pham on a temporary layoff since he was aware that many of his co-workers had been laid off in the past and that, in any event, Mr. Pham had condoned the layoffs. However, the Ontario Court of Appeal overruled that lower court’s decision.

The Court of Appeal’s Decision

The Court found that (i) the employer did not have an implied right to place Mr. Pham on a temporary layoff based on past practice; and (ii) the issue of whether Mr. Pham had condoned the layoffs required a trial to determine.

The Law Regarding Temporary Layoffs

The court summarized the law around constructive dismissals and temporary layoffs:

“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: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500, at paras. 37-43.

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: Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, at para. 14. This is so, even where the layoff is temporary: Stolze v. Addario (1997), 1997 CanLII 764 (ON CA), 36 O.R. (3d) 323, 35 C.C.E.L. (2d) 109 (C.A.).

In such cases, an employee has an immediate right to pursue a claim for constructive dismissal: Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, 71 C.C.E.L. (4th) 57, at para. 55.

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.”

Situations where an Employer can have an Implied Term Permitting Layoffs

In its ruling, the court held that Mr. Pham’s employment contract did not expressly or impliedly permit the employer to lay him off. In fact, the court rejected the employers argument that its past practice of layoffs created an implied right to layoff. Instead, the Court reaffirmed the principle that for an implied right to layoff to exist, it must be “notorious, even obvious, from the facts of a particular situation.” In this case, the fact that the employer had previously laid off Mr. Pham’s co-workers did not create an implied term in Mr. Pham’s employment contract that he could be laid off.

Condonation of Layoffs

In determining whether the employee had condoned his multiple temporary layoffs, the court confirmed that condonation can only be an employer’s defence to a constructive dismissal claim if an employer can prove 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), 1995 CanLII 7288 (ON SC)).

Accordingly, the employee’s failure to object to a layoff does not constitute condonation. Rather, condonation in the context of a layoff requires some positive action on the part of the employee, such as expressed 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.

Moreover, the court made several other important findings:

Even if Mr. Pham did sign the layoff letter (a disputed fact in the case), this was merely evidence of an acknowledgement of the terms of the layoff, rather than proof of his agreement to be laid off.

Mr. Pham did not seek legal advice until the layoff was extended multiple times. Therefore, the legal advice he obtained could not be viewed as knowledge of the ramifications of the initial layoff or consent to the layoff.

There is no requirement that an employee ask when they might be called back to work from a layoff before commencing an action for constructive dismissal.

Lessons Learned

This decision provides a few important lessons for employers in Ontario, particularly:

it is always important to have employee’s voluntarily permit a temporary layoff in advance (employment contract) or simultaneously (at the time of imposing the layoff)
employers cannot simply rely on past practices as somehow creating an implied right to temporary layoff employers
employers cannot simply rely on an employee’s silence to argue they accepted or approved the temporary layoff (silence does not equal to condonation)

Call an Employment Lawyer in Toronto

If you are an Ontario employee who believes they were constructively dismissed following a temporary layoff by your employer, it is important to speak with an experienced Toronto constructive dismissal lawyer as soon possible to understand your legal rights and options, including to negotiate or review a severance package. If you are an employee who believes you have been wrongfully dismissed and the decision to terminate was unjust or discriminatory, please speak with our experienced wrongful dismissal lawyer in Toronto regarding your options, including negotiating your severance package to obtain the severance compensation you deserve, as well as wrongful dismissal claim.

Contact us by phone 647-822-5492 or fill out the contact form to the side. Our employment lawyer in Toronto would be happy to assist in your employment law matter as quickly as possible.

Disclaimer: The content on this website and blog is not legal advice or legal opinion of any kind, and is only to provide general information. It is in no way particular to your individual case and should not be relied upon in any way. The outcome of a legal matter depends on its unique circumstances, and prior successes are not indicative of future results. No portion or use of this website or blog will establish a lawyer-client relationship with the author, this law firm or any related party. Should you require legal advice for your particular situation, please fill out the form below, or call 647-822-5492, to request an initial consultation.