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Silence Does Not Speak Louder than Words says Ontario Court of Appeal - Silence in the Face of a Temporary Layoff Does Not Equal Condonation

Recently the Ontario Court of Appeal (“ONCA”) determined that an employee’s silence does not equal a condonation to a temporary layoff. More importantly, the case, Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255, provides some much needed insight to employers on steps they should be taking to legally lay off employees. By way of background, the employee in this matter made a claim for wrongful dismissal after receiving a notice of layoff followed by several extensions. The employer brought a motion for summary judgment to dismiss the claim on the basis that the employee condoned the layoffs. The motion judge granted the employer’s motion for summary judgement and dismissed the claim. The employee appealed. Note that while this layoff took place during the COVID-19 pandemic, and the employer originally cited in its layoff notices the Infectious Disease Emergency Leave (“IDEL”) regulation, the employer chose not to rely on the Regulation during the summary judgement motion. As a result, the ONCA did not find it necessary to consider its effects on the layoff. If you are curious about temporary layoffs and IDEL, check out this recent blog.

Temporary Layoffs and Constructive Dismissal

A temporary layoff occurs when an employer either reduces or temporarily ends an employee’s work but does not terminate the employment relationship. During the COVID-19 pandemic this was a tool many employers turned to in order to manage the resulting economic downturn. Important to know, however, is that for employers to legally implement a temporary layoff they must have an express or implied term in the employment agreement. S. 56(1)(c) and 56(2) of the Employment Standards Act, 2000 (“ESA”) gives employees the option to “wait and see” if they will be asked to return to work before treating the employment relationship as severed and claiming constructive dismissal. According to the ESA, a layoff will always be deemed a termination if it last longer than 35 weeks in a 52-week period.

To establish a constructive dismissal an employee must either prove that the employer breached an essential term of the employment contract or that the employer’s conduct shows that they no longer intend to be bound by the employment contract. However, while the ESA allows for employers to successfully lay off employees through the contract, it does not displace the greater contractual or common law right protections. Precedent cases in Ontario have found that whether or not a layoff was done in accordance with the ESA is irrelevant to whether or not it is a constructive dismissal under the common law. What this means is that an employer could lay off an employee in accordance with the ESA but be found to have engaged in a constructive dismissal under the common law. A constructive dismissal cannot be established if employees condone the employer’s conduct as they would be seen as freely consenting to the change.

The Decision

In this appeal, the employer did not have an express term in the employment agreement to layoff the employee but argued that there was an implied right to layoff due to its past practice of laying off employees. The employer further argued that the appellant was undoubtedly aware that he would be recalled soon as most of his colleagues had already been recalled. The ONCA disagreed, finding that just because some employees had been previously laid off before, did not create an implied term in the plaintiff’s contract to lay him off.

The ONCA further considered whether the employee’s conduct constituted a condonation of the layoff and found that it did not for three reasons. First, the employee’s signature on the layoff letter could not constitute condonation as there was no evidence that the signature was anything more than an acknowledgement. Second, even though the employee did contact a lawyer it was not until he had been laid off for several months. There was simply no evidence that he had knowledge of the ramifications of the layoff or that the employer had relied on the employee having received legal advice. Finally, there was no evidence that the employee’s silence or failure to object was a condonation of the layoff. The silence could not be considered condonation for the following reasons:

• employees are allowed to take a reasonable amount of time to assess contractual changes before they are required to take an irrevocable legal position;
• the employer renewed each layoff notice within the 35-week period and cited IDEL making it appropriate for the employee to continue to “wait and see” what would happen;
• the employee did not engage in a positive action to show condonation;
• the employee was unable to condone to the changes to his employment as he was not actively working; and,
• there is no requirement for employees to inquire into when they might be called back to work before commencing a constructive dismissal claim.

Based on the foregoing, the ONCA determined that there was a genuine issue that required a trial and remitted the wrongful dismissal action back to the lower Court.

Key Takeaways

Employers who anticipate laying off employees should take several cues from this decision. First, employers should include specific language in their employment contracts giving them the express ability to lay off employees. Second, if employers find themselves in the unfortunate situation where they must lay off employees, they should request employees to sign a layoff consent. When making the request employers should be sure to advise employees to seek legal advice and allow enough time for them to do so. Finally, employers should be put on notice that just because employees do not explicitly object to a layoff they are not barred from successfully advancing a constructive dismissal claim.

The team at CCPartners can assist you with temporary layoffs or any other employment and labour law needs.

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