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Employment News: A temporary layoff may be a dismissal!

In Trites v. Renin Corp, 2013 ONSC 2715, an employment law matter, the Ontario Superior Court gave employers a misconceived confidence that they can lay off employees provided they follow the requirements of the Employment Standards Act, 2000 ("ESA").

In Trites, the employer faced significant financial difficulties and as a result, the company decided to lay off employees on a rotating basis. Ms. Trites was ultimately laid off in November of 2011. In January 2012, she was advised that she would be recalled in July of 2012. Ms. Trites took the position that she was constructively dismissed and the court agreed with her.

However, the Court also found that had the employer met the requirements under the ESA to maintain her temporary layoff status, she would not have been considered constructively dismissed:

[29] In my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA. This said, however, I am not persuaded that the layoff in question in this case qualifies as a temporary layoff under that Act.

This statement is at odds with an earlier Ontario Court of Appeal case, Stolze v. Addario, 1997 OJ No. 4754. This court considered the situation of an employee who said he was constructively dismissed when he was laid off because neither the express nor implied terms of his employment permitted the employer to invoke an unpaid layoff. The Court of Appeal found that in the absence of evidence of a policy or practice within the company to lay off employees, any layoff constituted a repudiation of a fundamental term of an employment contract, thereby resulting in a constructive dismissal.

Ontario cases after Trites followed the Court of Appeal's ruling. In Michalski v. CIMA Canada Inc., 2016 ONSC 1925, the employer's position was that Mr. Michalski was not constructively dismissed because:

1) The temporary layoff complied with all statutory requirements under the ESA; and

2) Alternatively, there had been previous instances of temporary layoffs at the office and Mr. Michalski knew or ought to have known that a temporary layoff was a possibility. Additionally, Mr. Michalski's knowledge of the consulting industry is evidence that he knew layoffs are a widely used practice.

Justice M. James disagreed. The mere fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on other employees. This alone did not amount to sufficient evidence of a policy or practice to invoke layoffs:

[22]... The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation."

Furthermore, Justice M. James boldly stated:

[23]... It appears to me that the Trites decision is out of step with the weight of the prior authorities... To the extent that the decision of Moore J. in Trites stands for the proposition that the common law conditions precedent to a lawful layoff have been completely displaced by the ESA, I respectfully disagree.

What does this mean for employers?

Advising an employee they have been temporarily laid off can result in serious financial consequences if the employer cannot show that the possibility of such a layoff was one of the terms and conditions of employment agreed to by the parties (whether explicitly, through a written contract or well-communicated policy, or implicitly, through a widely known practice within the employer's organization or industry).

What does this mean for employees?

Even if an employee is laid off in accordance with the ESA, they may have been constructively dismissed and are owed notice and damages at common law.

To reach the author of this blog, Jean-Francois Lalonde, email [email protected] or call 613.232.5773 x 246.

Jean-Francois Lalonde is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Vice & Hunter LLP. He has extensive experience practicing in the areas of employment law and is a part-time professor at La Cité Collégiale teaching Employment Law for Paralegals.

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