Jun 21

Temporary Layoffs Generally not Legal: Toronto Employment Lawyer

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No Inherent Right to Temporary Layoffs

A layoff, even if intended to be temporary, generally results in a constructive dismissal if it is not allowed by the employment contract.

The ability to temporary layoff employees, however, is confused by the fact that the Ontario Employment Standards Act, 2000, explicitly references temporary layoffs and sets out the parameters for how long a temporary layoff can last, and at which point it becomes a termination. As such, employers are often under the false assumption that the ESA gives them the inherent right to place employees on a temporary layoff. However, this is rarely the case, and employers must proceed with caution when making the decision to place employees on layoffs.

However, Section 8 of the ESA specifically says that no civil remedies of employees against employers are affected, meaning that the ESA gives employers no rights at all.

Implied Right to Layoffs

While the right to temporary layoff employees may exist in certain industries such as construction, it is NOT an automatic or implied right, unless: 1) it is explicitly set out in the employment agreement; or 2) there is strong evidence to suggest that the employee is aware of the risk of being laid off.

Such was the finding of the Ontario Superior Court of Justice in Chea v. CIMA Canada Inc., and its companion decision, Michalski v. CIMA Canada Inc.

In those cases, the Plaintiffs were both temporary laid off by CIMA in January of 2013.  Neither of the Plaintiffs objected to the layoff at the time it was imposed. The Plaintiffs were recalled to work five months later, but both declined the recall invitation as they had already obtained alternative employment. Instead, the Plaintiffs launched legal claims for constructive dismissal. At the summary judgment motions, the plaintiffs argued that it was neither an express or implied term of their contracts that the Defendant could invoke the layoff provisions of the ESA. No mention of temporary layoffs was made in their employment contracts, and the possibility of layoffs had never been discussed with them prior to the layoffs.

The Defendant argued that it had an implied right to temporary layoff the Plaintiffs; the Plaintiffs were aware that there had been layoffs in the Ottawa office in the past, and ought to have known that temporary layoffs were a possibility in the consulting industry. The Defendant further relied on the fact that the Plaintiffs raised no objection to the layoff.

The Court held the right to impose a layoff as an implied term must be notorious, even obvious, from the facts of the particular situation. This high standard was not met in this case. The Judge found that the Plaintiffs could not reasonably be expected to have anticipated the layoffs, as there had been no layoffs in the company before October 2012, just months before the Plaintiffs were laid off. Furthermore, just because a co-worker had been laid off does not create any legal basis to impose this layoff on the Plaintiff. As a result, both Plaintiffs were entitled to damages for the termination of their employment.

Acquiescence and Layoffs

With respect to the Defendant’s argument that the employees failed to object to the layoff, the Court in the CIMA cases held that an employee may in fact accept the layoff without being bound to it.  This means that simply acquiescing to a layoff is not enough to disprove a constructive dismissal claim, if in the first place, there is no explicit or implicit contractual ability to layoff the employee.

Such was the finding in the recent Divisional Court of Appeal decision of Kurt v. Idera Inc. o/a Uptime Software Inc. where Monkhouse Law represented the employee. In that case, the employee had been placed on a temporary layoff and was recalled to work six months later. He declined the recall position, as he had already obtained alternative employment. Instead, he retained counsel and launched a wrongful and constructive dismissal claim. At the summary judgment motion, the judge found that Mr. Kurt had acquiesced to his layoff, as he had waited six months before objecting to his layoff. The motions judge did not consider whether Mr. Kurt’s employment contract allowed the layoff in the first place. Instead, he dismissed the Plaintiff’s wrongful dismissal action on the basis that, by waiting six months before raising an objection, the Plaintiff had acquiesced to the layoff. The Plaintiff appealed.

On appeal, the Divisional Court held that the motions judge erred in law when he found that the appellant had acquiesced to his layoff. The Court held that in any constructive dismissal claim, the first step is always to consider the terms of the employment contract. This is per the Supreme Court of Canada’s direction in Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (“Potter”). Potter explains that determining whether constructive dismissal has occurred is a two-step analysis. At the first step, the Court must determine whether there is an express or implied term in the employment contract which gives the employer the authority to place the employee on a layoff. If there is not, the change is unilateral and will constitute a breach of the employment contract and a wrongful termination.

However, although the lower court ruling was overturned by Monkhouse law the logic might still be used by a different judge to find that fast action is required. So if you are laid off you should hire a lawyer immediately.

These cases, collectively, stand for the proposition that an employer has no right to temporary layoffs where the employment contract does not provide for it, and where it is not implied and well known. In such cases, the employee has in fact been terminated and is entitled to damages arising from a wrongful dismissal, regardless of any failure to object to the layoff.

If you have questions about temporary layoffs and are concerned about your legal rights, please contact Monkhouse Law today for a free telephone consultation.

About the Author:

Sara Yousefi is an associate lawyer at Monkhouse Law where she practices Employment, Human Rights and Disability Insurance Law. Sara can be reached at sara.yousefi@monkhouselaw.com.