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Employee Not Constructively Dismissed, Employer Ordered to Pay Damages

In many instances employers will litigate against the assumption of a power imbalance, an employee viewed as the party in need of protection. This is seen in the way employment contracts are interpreted in wrongful dismissal claims, and how actions and decisions of employers are scrutinized. One certainty for employers is when found to do nothing wrong, when your case has been proven, you are not liable for damages. Recently an Ontario Superior Court decision found otherwise.

In a case that left both parties scratching their heads, Justice Ray ordered common law damages against Enablence Canada Inc. despite no finding of liability.

The case, Muntean v Enablence Canada Inc., was a claim for wrongful dismissal damages by Mr. Muntean, an engineer laid-off after 6.5 years of employment. The employment relationship was based on a 3-year written contract that provided for 6-months of notice if terminated by the employer, required 3 months’ notice if ended by resignation, and did not contemplate lay-off.

In November of 2014 the employer instituted a lay-off affecting Mr. Muntean due to financial difficulties. The lay-off notice indicated that his employment benefits would continue and the hope for recall within 35 weeks. In less than 4 weeks the employer requested that Mr. Muntean return to work, but the employee claimed the layoff amounted to a constructive dismissal. If the lay-off amounted to a constructive dismissal then the employee would be entitled to damages, either through the termination provisions of the contract or at common law.

Despite Ontario case law that temporary lay-offs are not an automatic right of employers, a lay-off may be appropriate with evidence of past practice, contemplation within an employment contract, or if the employee acquiesces to the lay-off. In this case the layoff notice clearly contemplated recall and allowed for continuing benefits. Mr. Muntean also acquiesced to the layoff by not immediately treating the layoff as a constructive dismissal and, more importantly, his use of the continued employment benefits. In fact, Mr. Muntean continued to claim benefits until May 2015 despite commencing work with a new employer in February of the same year.

Justice Ray concluded that Mr. Muntean acquiesced to the layoff and “at no time did the lay-off become a constructive dismissal.” It was found that neither party could rely on the contract for damages related to the required notice provisions. Despite this finding, Justice Ray determined “the plaintiff is entitled to damages for wrongful dismissal on a common law basis” and ordered damages from the date of the notice of layoff until Mr. Muntean commenced his new employment.

The ordering of damages for wrongful dismissal without finding anything “wrongful” about the dismissal is bizarre and confusing. On a positive note, this case is unlikely to stand on appeal. This case doesn’t provide any lessons for employers but does highlight the inherent riskiness of litigation. If you’re faced with a wrongful dismissal claim, contact our team.