When considering an employee layoff under the Ontario Employment Standards Act, 2000, the immediate question to ask is whether the employee’s employment agreement expressly permits a layoff. If not, then the question turns to whether or not an implied term of the employee’s agreement permits a layoff, which may be the case in certain limited circumstances. However, if neither an implied nor express term permits a layoff, the employee may have a claim for constructive dismissal if they are laid off from their position.
A constructive dismissal can be, essentially, a unilateral change to a term or condition of the employee’s employment without the employee’s consent. Where an employer lays an employee off, the question of whether or not that action is a constructive dismissal of the employee’s employment will depend on the employee’s reaction to the layoff. If the employee rejects the change, they may have a good claim to termination pay as a result of the constructive dismissal. If the employee accepts the change then the employee cannot claim constructive dismissal from the employer’s act.
Ontario Court of Appeal Weighs In
A recent case at the Ontario Court of Appeal, Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255 considered what could constitute acceptance or rejection of a layoff. This case featured an employee who was laid off in the context of the COVID-19 pandemic. A lower court granted a motion to summarily dismiss the wrongful dismissal claim and an appeal was brought to the Ontario Court of Appeal (ONCA) by the employee contesting the summary dismissal. The key question for the purposes of our blog post was whether the employee in this case condoned or agreed to the layoff.
The employer argued that the employee did condone the layoff because the employee:
- Signed a Layoff Letter acknowledging his layoff; and
- Failed to object to the layoff for over 9 months.
The ONCA found that the employee’s signature on the Layoff Letter was not condonation, it was just an acknowledgement that he understood the terms of the Layoff from the other side. Therefore, it was not sufficient to constitute condonation of the layoff.
The more significant finding, however, was regarding the failure to object to the layoff. Under Ontario law, employees must object to a fundamental change to their agreement, including to a layoff, within a “reasonable time” or otherwise their lack of objection could be considered condonation. The ONCA found that waiting 9 months was reasonable in the circumstances of the employee.
The ONCA disagreed with the lower court that the period of silence during the employee’s layoff constituted condonation. The employee adopted a “wait-and-see” approach because the employer represented to the employee that it intended to recall him and also invoked the Infectious Disease Emergency Leave as one of the justifications for continuing the layoff. In such a circumstance, the period of time was reasonable.
In addition, the ONCA stated that condonation to layoff is expressed by positive action. Positive action could include stated consent to the layoff or the willingness to work before claiming wrongful dismissal. There was no such positive action by the employee in this case, so there was nothing on which to ground condonation of the employer’s layoff.
The case, as a result, has been returned to the Superior Court for a wrongful dismissal trial. Whether the employee is successful on the main action remains to be scene, but this case serves as an important clarification of when an employee will be seen to have condoned a change to the terms and conditions of their employment. Silence may not be sufficient.
The key takeaway is the importance of express terms and conditions in an employment agreement regarding layoffs. If you have not yet updated your agreements with language permitting layoffs, we highly recommend doing so as soon as possible. This language allows flexibility to your business, but also clarity and notice to the employee if a layoff becomes necessary. Without such language, employers may find themselves in a much less flexible position than expected.
At Bridge Legal & HR Solutions we can help you untangle and understand the web of obligations that applies to your employment relationships. To find out how we can help, contact us through our contact form or call us at 647-794-5442.