THE EMPLOYERS' EDGE
Compliance with Temporary Layoff Provisions of the Employment Standards Act, 2000: Ontario Court May Signal a Shift in the Law of Constructive Dismissal
When an employer is facing tough financial times they may decide to implement temporary layoffs of some employees until the business can get back on its feet. This is an unfortunate but commonly contemplated action in the unionized setting where layoff protocols are normally included in the collective agreement. Historically for non-unionized employers, great caution has been needed in these circumstances since a unilateral layoff was commonly considered to constitute a constructive dismissal, for which the affected employee can claim wrongful dismissal damages. However, a recent decision coming from the Ontario Superior Court of Justice may be signaling a significant change in employment law in this regard.
In the case of Trites v. Renin Corp., 2013 ONSC 2715 (CanLII), the plaintiff, Sandra Trites, had been employed almost six years in the position of division controller at the time of her temporary layoff. She had never entered into a written employment agreement with the employer. Renin Corp. was in financial difficulties and had instituted rotating temporary layoffs in 2008. Those employees who were not returned to Renin were paid their termination and severance entitlements under the Employment Standards Act (ESA).
In Ms. Trites’ unusual case, she was given notice of layoff in January 2012 with a recall date in July 2012. The layoff notice was unilateral, and did not include any consultation or negotiation with Ms. Trites. Consequently, she considered that she had been constructively dismissed by Renin and brought her action to Court where she sought wrongful dismissal damages.
Ms. Trites submitted that this was a clear example of constructive dismissal, in which the employer made a unilateral change to the employment relationship, to the detriment of Ms. Trites, and she was accordingly entitled to treat her employment as terminated.
In its defence, Renin submitted to the Court that it was in compliance with the ESA on its plain and clear wording, which states that a temporary layoff as defined in subsection 56(2) does not constitute termination. The employer argued that it is impossible for the common law doctrine of constructive dismissal to apply until a temporary layoff has exceeded the time limits stipulated by s.56 of the ESA.
In the circumstances, the Court agreed with Ms. Trites that the employer had constructively dismissed her employment. It was crucial in this context that Renin Corp. did not comply with the ESA provisions it invoked, noting that although Ms. Trites was laid off for less than 35 weeks – which is allowed by the ESA – she did not receive substantial payments from Renin, or supplementary unemployment benefits, or ongoing medical, dental, and insurance benefits. In all, the Court found that Renin failed to bring its proposed layoff protocol within the terms of the ESA, and so Ms. Trites had been constructively dismissed.
The interesting statement of law for employers, however, is found at paragraph 29 of the decision, where the Court stated:
 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. …
The Court has suggested that had Renin fully complied with the provisions of the ESA it would have made the opposite finding. This is a significant shift in employment law, where historically, Courts have applied the long-established principle of constructive dismissal, without the same careful regard to the temporary layoff provisions of the ESA.
An employer is always well-advised to enter into an employment agreement in writing with its employees, and if temporary layoffs are a possibility in the business, to include provisions in the agreement that permit temporary layoffs in accordance with the ESA. This way, an employee cannot claim that a temporary layoff is a unilateral change to the employment relationship. However, what the Ontario Superior Court of Justice now suggests is that so long as the employer is fully compliant with subsection 56(2) of the ESA, a temporary layoff, even if unilateral, will not necessarily constitute a constructive dismissal. The relevant statutory terms of subsection 56(2) that employers should make themselves aware of include the following:
• A temporary layoff cannot be for longer than 13 weeks in any period of 20 consecutive weeks;
• Alternatively, a temporary layoff can be longer than 13 weeks in any period of 20 consecutive weeks if additional conditions are met:
o The temporary layoff does not exceed 35 weeks in any period of 52 consecutive weeks; AND
o The employee continues to receive substantial payments from the employer;
o The employer continues to make all benefits payments for the employee;
o The employee receives supplementary unemployment benefits;
o The employer recalls the employee within the time set out in an agreement between the employer and employee.
Deciding when to institute layoffs and how to do so in compliance with the ESA is always a difficult task. The labour and employment law professionals at CCPartners have a wealth of experience in dealing with these complicated situations and are able to help navigate you through the potential minefield and steer you clear of constructive dismissal pitfalls.
Please Note: This blog has been prepared as an informational service for our clients and other interested parties. It is not intended to constitute legal advice, a complete statement of the law or opinion on any subject. Although we endeavour to ensure the accuracy of the content, no one should act upon the information provided without a thorough examination of the law after the facts of a specific situation are fully considered.