Can your employer put you on a temporary layoff without it being a termination? Many employees in Ontario assume a layoff is automatically a constructive dismissal. In 2025, the Ontario Superior Court of Justice addressed this issue in T. v. Salytics Inc., 2025 ONSC 3461 (CanLII), clarifying when layoffs are legal and when they may amount to dismissal.
Background of the Case
The plaintiff worked at Salytics Inc. for 11 years. In 2024, the company faced financial difficulties and placed him on a temporary layoff. He brought a claim before the Ontario Superior Court of Justice, arguing this was a constructive dismissal and seeking up to 12 months of damages in lieu of notice.
The plaintiff’s case was built on two main arguments:
1) At common law — which is judge-made law that applies in addition to the minimum standards in employment legislation — a unilateral layoff is usually considered a constructive dismissal unless the employee has agreed otherwise in their employment contract. Learn more about how this impacts your rights in our guide to common law notice.
While his employment contract included a temporary layoff clause, it was grouped under the Termination section alongside a “for cause” termination clause that was invalid under the Employment Standards Act, 2000 (ESA). The ESA is Ontario’s law that sets minimum standards for employment, including hours of work, vacation pay, termination pay, and layoffs. For the rest of this article, we’ll refer to it as the ESA.
2) Relying on the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391, the plaintiff argued that if one part of a termination clause is invalid, the entire clause should be void.
The Ontario Superior Court’s Decision
1) A Layoff Provision ≠ A Termination Provision
In this case, the Ontario Court explained when layoffs are legal under employment contracts. The Court ruled that a temporary layoff clause is not a termination clause in substance. Even if it appears under a “Termination” heading, what matters is the effect of the clause. A layoff pauses the employment relationship; it does not end it.
The Court noted that “a temporary layoff provision is distinct from a termination provision—its effect is to pause, not end, the employment relationship” (Taylor v. Salytics Inc., 2025 ONSC 3461).
2) Substance Over Form
The judge emphasized that courts must look at the meaning of a clause, not just where it is located in the employment contract.
3) Employment Standards Act (ESA) Section 56(4)
The ESA expressly states that a temporary layoff is not a termination if it follows ESA rules. In this case, Salytics complied with those timelines, so the layoff was valid.
4) Termination Clauses Were Irrelevant
The employer conceded that the “for cause” termination language was invalid. Normally, under Waksdale, that would void the termination provisions. But here, the temporary layoff clause survived because it was not a termination provision at all.
What About Damages?
The Court also considered damages in case the layoff had been ruled a constructive dismissal.
- Notice period: Six months, given the plaintiff’s 11 years of service (see more on common law notice).
- Salary basis: His original salary ($117,300), not the reduced rate he had agreed to temporarily. The Court reasoned that otherwise, employers could reduce salary strategically to lower severance pay entitlements.
- Vacation pay: 6% of wages, as required by the ESA.
Ultimately, the plaintiff’s claim was dismissed, and the layoff clause was upheld.
Key Takeaways for Employees
- Read your employment contract carefully: If your employment contract includes a temporary layoff clause, your employer may be able to place you on a layoff without it being constructive dismissal—provided they follow ESA rules.
- Location doesn’t matter: Just because a layoff clause is under “Termination” doesn’t make it invalid. Courts will look at substance, not headings.
- Not all layoffs are valid: If your employment contract does not have a clear layoff clause, a unilateral layoff is usually constructive dismissal.
- Damages matter: Even when layoffs are challenged, courts may use your full salary (not a reduced one) to calculate severance pay.
What This Means for You
This Ontario Superior Court decision shows that employers can enforce temporary layoff clauses if they are drafted properly and comply with the ESA. But not every employment contract includes them, and many employees still have strong claims for constructive dismissal.
Frequently Asked Questions
1. Can my employer lay me off temporarily in Ontario?
Yes — but only if your employment contract clearly allows for a temporary layoff and the employer follows the timelines and rules in the Employment Standards Act, 2000 (ESA). Without a layoff clause, most temporary layoffs are considered constructive dismissal at common law.
2. Does a layoff mean I’ve been terminated?
Not always. In Taylor v. Salytics Inc. (2025), the Ontario Superior Court confirmed that a properly drafted layoff clause is not the same as a termination clause. This means a layoff can pause the employment relationship without ending it — but if your contract doesn’t include such a clause, you may be entitled to severance pay.
3. What should I do if I’ve been laid off in Ontario?
If you’ve been placed on a temporary layoff, review your employment contract and seek legal advice. Even if your employer points to a layoff clause, it may not be enforceable.
Learn More
- Temporary Layoff Ontario
- Constructive Dismissal in Ontario
- Termination Clauses
- Employment Contracts
- Severance Pay
- Common Law Notice
This article was reviewed for legal accuracy by Andrew Monkhouse, Employment Lawyer and Managing Partner at Monkhouse Law Employment Lawyers.
At Monkhouse Law Employment Lawyers, we regularly help employees challenge layoffs, constructive dismissal claims, and invalid termination clauses.
If you’ve been laid off or think your contract isn’t enforceable, don’t assume your employer is right. Contact Monkhouse Law Employment Lawyers today for a free 30-minute consultation and protect your rights.