Overview
As the analysis below will show, the statutory provisions seemingly allowing the right of temporary lay-off will permit the employee to make the assertion that such conduct is termination of employment. A secondary issue will arise as to whether the employee must accept the offer of recall in satisfaction of a mitigation obligation.
This issue can be neatly avoided completely by including a term in the employment contract which allows the employer this right.
A third issue will arise. If the above are both answered affirmatively, would the employee nonetheless be entitled to the minimum statutory notice and/or severance.
It is clear that an indefinite lay-off is an act of constructive dismissal, absent an agreement to the contrary.
Issue One Statutory Lay-off as Termination
The clear momentum of the case law is to require apparent prior consent from the employee, by writing or practice, to allow the employer the right of temporary lay-off, even when contemplated by the relevant statute. This issue is also reviewed here.
Ontario
Although the Ontario statute, on its face, allows for the right of lay-off, such action by the employer has been interpreted to be termination of employment. The employee must consent in writing or by visible acceptance of a past practice to allow for the employer’s ability to effect a temporary lay-off without effecting a dismissal in law.
The Ontario Court of Appeal determined this issue in Stolze v Addario in which the employee had been indefinitely laid off. The Court, however, concluded that such conduct would be considered termination of employment whether it was indefinite or even for the time period set out in the statute:
Although the memorandum referred to by the Divisional Court did not refer to any terms of employment, the history of the appellant’s relationship with the respondent gives rise to obvious implied terms of employment, which include employment at an annual salary for an indefinite period of time. In our view, such implied terms, in the absence of evidence of a policy or practice within the employer company of laying off “key” employees, constitutes the lay-off a repudiation of a fundamental term of this employee’s contract. He was, therefore, constructively dismissed.
The solution to this issue is to create written agreed terms of temporary lay-off which comply with the statute. The Act does not allow a lay-off to exceed 35 weeks in a 52 week period, in which latter instance, the statute will treat such conduct as termination.
Hence, where an employment contract does allows for a temporary lay-off, this term cannot permit a lay-off which contravenes the statutory provision.
This was again the view of the Ontario Court of Appeal in Elsegood v Cambridge Spring Service. The case was not decided on this reasoning, but it is nonetheless instructive on this issue:
In this case, the employer asserts that the employment agreement contained an implied term that allowed the employee to be placed on an indefinite layoff. The employee had accepted a previous layoff and recall, and he testified that he considered his employment to continue during the second layoff until it reached 35 weeks. Like the courts below, I find it unnecessary to decide exactly what the term of the agreement was. The analysis that follows applies even if the employment agreement contained an implied term allowing the employer to lay off the employee for more than 35 weeks within a consecutive 52-week period. I proceed as if that were the case.
[16] The employer’s argument is that since the employee agreed to be laid off for an indeterminate period of time, his status at common law continued to be an employee on layoff subject to recall. The argument is untenable because, even accepting the faulty premise that the common law continues to operate independently of the ESA, the common law would always allow an employee laid off for more than 35 weeks to claim constructive dismissal at common law. This is consistent with the provisions of s. 67(3) of the ESA, to which I will refer later and which [page148] entitle an employee to elect whether to be paid termination or severance pay or retain the right to be recalled. A term of an employment contract that provided otherwise would be null and void. This conclusion flows from the Supreme Court’s reasoning in Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41.
The statute allows a temporary lay-off as defined below:
For the purpose of clause (1) (c), a temporary layoff is,
a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;
a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and, the employee continues to receive substantial payments from the employer, the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,
the employee receives supplementary unemployment benefits, the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so, the employer recalls the employee within the time approved by the Director, or in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or
(c) in the case of an employee represented by a trade union, a layoff longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union. 2000, c. 41, s. 56 (2) ; 2001, c. 9, Sched. I, s. 1 (12).
British Columbia
The case law in British Columbia has followed the same logic as seen in the Ontario cases. The employer must bargain for and receive consent to effect a temporary lay-off by agreement or apparent practice by which consent may be seen.
The decision of Sigurdson J. of the Supreme Court of British Columbia in Collins v Jim Pattison Industries stated as follows:
… In my view, the Act does not grant all employers the statutory right to temporarily lay off employees, regardless of the terms of their employment contract. Rather than creating new rights, the Act appears to be qualifying employment agreements in which the right to lay off already exists. Therefore, unless the right to lay off is otherwise found within the employment relationship, the above cited sections of the Act are not relevant.
This decision was referenced with approval in the B.C. Court of Appeal decision of Sinclaire v Intrawest Resort Ownership, a 1995 decision.
Alberta
The law in Alberta initially took a different turn. The 2003 decision of Ouellette J. of the Queen’s Bench of Alberta determined in Vrana v Procor Limited that the Stolze line of reasoning would not apply in view of the particular wording of the Alberta statute:
[23] I am of the view that s. 62 of the Employment Standards Code has created a new right for employers in Alberta. The plain and express language of s. 62 entitles an employer who wishes to maintain an employment relationship to temporarily lay off the employee. The length of the temporary layoff is subject to the terms contained in ss. 63 and 64. The effect of s. 62 is to suspend or delay the use of a common-law right until the occurrence of certain events, (i.e., for at least 60 days (s. 63(1)), or sooner, in the event of a failure to return to work after recall (s. 64(1)). Therefore, where at common law an action for wrongful dismissal could be commenced immediately upon getting notice of a layoff (where there is no express or implied term of the contract of employment permitting a temporary layoff without pay), s. 62 prevents the commencement of an action until such time as the time lines in s. 63 or s. 64 have been reached. An action by an employee for wrongful dismissal cannot be commenced until after the expiration of the time lines in either s. 63 or s. 64 because, pursuant to s. 62, there continues to exist an employer-employee relationship even though the employee is temporarily laid off.
The Court of Appeal reversed this decision, but not based on the question addressed in the reasons set out above. The appellate court concluded that the notice provided by the employer was procedurally defective and for this reason, set aside the above decision:
[13] This being so, we have concluded that, at a minimum, the potentially negative consequences of a temporary layoff demand that when an employer elects to exercise its rights under s.62, it should provide a fair notice to the employee of its intention to do so. To comport with the spirit and intent of the Code and to ensure that the employee is properly advised of the employer’s intentions, the notice should contain not only the fact of the temporary layoff and its effective date but also the relevant sections of the Code outlining the effect of that layoff, that is ss.62, 63 and 64. This minimal obligation on the part of the employer will assist in ensuring that there is no misunderstanding between employer and employee as to the respective rights and obligations of each, a goal stressed in the preamble to the Code. In particular, it will avoid the employer’s lulling an employee into a situation where the employee believes that he or she has been constructively dismissed.
However, Moore J. in the 2005 Turner v Uniglobe Custom Travel reviewed the competing arguments on this issue and sided with the view taken by the Ontario Court of Appeal and rejected the ratio of Vrana trial decision above. The court accordingly found that an employer acting in accordance with the statute to effect a temporary lay-off brought about a termination of the relationship at common law.
Manitoba
Case law in Manitoba has also accepted the position that such a temporary lay-off is in law termination. This was so stated by Spivak J. in Rodger v Falcon Machinery.
New Brunswick
The decision of Clendening J. in Pryor v Taylor’s Feed agreed also with the Ontario case law and determined that a lay-off would be considered in law a termination of employment, absent an agreement to the contrary.
To the same end are the reasons of Morrison J. in the July 2010 case of MacDonald-Ross v Connect North America.
Remaining jurisdictions
There is no interpretative case law in the remaining Canadian jurisdictions.
Condonation of Lay-Off
This issue was considered in a recent Ontario Court of Appeal decision. 1 This Court notably reversed the motions judge by concluding that the apparent practice of the company in effecting other lay-offs does not constitute acceptance of the employer’s right to lay-off:
Where the employment contract has no express term concerning lay offs, a right that an employer may do so will not be readily implied. The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee. “The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”: Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.
The Court of Appeal looked to the test applied in a constructive dismissal context by analogy to find the following as the test for condonation:
An employer’s conduct that would otherwise support a finding of constructive dismissal may however be condoned by the employee, such that the employee cannot claim to have been constructively dismissed. Condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”: Greaves v. Ontario Municipal Employees Retirement Board (1995), 1995 CanLII 7288 (ON SC), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.).
The Court stated that “positive action” would need to be proven to establish this defence. This would include direct expression of the acceptance of such a term in this context:
Second, condonation in the face of a layoff is expressed by positive action. Positive action includes expressed consent to the layoff or expressing a willingness to work before claiming wrongful dismissal such that the employer would reasonably believe that the employee consented to the change in the terms of employment: see, for example, the indicia of condonation present in Muntean v. Enablence Canada Inc., 2016 ONSC 923, at paras. 10-13. There is no such evidence here.
Mitigation
This issue becomes more complicated in the context of the employer’s recall to work notice, on parallel terms and conditions and presumably absent any adverse or hostile working conditions.
The general theme of the cases is to consider the statutory lay-off as termination of employment and then apply Evans considerations to the offer of recall.
Should the mitigation be found, the issue will then arise as to the salary arrears from the termination date to the date of recall.
In this instance, the employer will be obliged to pay the salary arrears from the date of "termination" to the date of recall. 2
The issue that none of these cases raise is that, noting the finding of termination, the statutory payment is due on that date. This question is more significant in Ontario, given the application of the severance entitlement. For example, in Chevalier reviewed below, the statutory payments due on termination would have been 34 weeks.
Such were the facts before MacAdam J. of the Supreme Court of Nova Scotia in Damery v Matchless Inc., a 1996 decision well before the Supreme Court of Canada decision of Evans. The trial judge found that the plaintiff had no intent of returning to work with the same employer and found such conduct was a violation of his duty to mitigate. The damage claim was allowed, hence, from the date of the lay-off to the date of the recall notice.
An argument may be made by the employee that an unqualified return to work in response to a recall notice is, in effect, implicitly agreeing to the employer’s right of lay-off, and hence vulnerable to the very same conduct in the future.
This seemed to be the implicit theory in the decision of Moore J. in Turner v Uniglobe in rejecting the employer’s submission to this argument of recall:
[72] When Turner received the October 30th “recall letter” on October 31st, there was no current lawsuit by Turner against the defendants. But Turner and the defendants knew that a lawsuit was imminent - - from Mr. Landry’s October 18th, 2001 letter.
[73] There was nothing in Beth Gardner’s October 30th, letter that guaranteed “during the next 12 months Uniglobe will not give you a layoff pursuant to sections 62, 63, and 64 or the Employment Standards Code. Therefore, please return to work to mitigate your damages.” Therefore, if Turner returned to work at Uniglobe without that guarantee, Turner would be taking a gamble.
[74] The defendants have the burden of proving Turner’s failure to mitigate, a burden not lightly discharged. Various cases cite Cheshire Fifoot Furmston’s, Law of Contract, 14th ed. (London: Butterworths Lexis Nexis, 2001) at 685:
But the burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands positive action from one who is often innocent of blame.
[75] The defendants have not proven that Turner did not mitigate her damages.
The Ontario Superior Court considered such a plea from the company in the decision of Chevalier v Active Tire. The plaintiff had been advised of his lay-off, only to be told a few days later that the company had mistakenly believed it had such a legal right. It then offered him his employment back on similar terms.
This offer was declined and was fatal to the plaintiff’s case as the trial judge found this to be a failure to mitigate.
The relevant passage from Evans was cited by the court:
In support of its position that Mr. Chevalier was required to return to work for Active Tire when called back, Active Tire relied on the decision of the Supreme Court of Canada in Evans v. Teamsters Local Union No. 31.[5] In that case, the court held that in appropriate circumstances, a dismissed employee would be required to return to work for the same employer in order to mitigate the employee’s damages.[6] The court set out the relevant considerations in making this determination as follows:
Where the employer offers the employee a chance to mitigate damages by returning to work for him or her, the central issue is whether a reasonable person would accept such an opportunity. In 1989, the Ontario Court of Appeal held that a reasonable person should be expected to do so "[w]here the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious" (Mifsud v. MacMillan Bathurst Inc. (1989), 1989 CanLII 260 (ON CA), 70 O.R. (2d) 701, at p. 710). In Cox, the British Columbia Court of Appeal held that other relevant factors include the history and nature of the employment, whether or not the employee has commenced litigation, and whether the offer of re-employment was made while the employee was still working for the employer or only after he or she had already left (paras. 12-18). In my view, the foregoing elements all underline the importance of a multi-factored and contextual analysis. The critical element is that an employee "not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation" (Farquhar, at p. 94), and it is that factor which must be at the forefront of the inquiry into what is reasonable.[7]
The argument of implicitly accepting amended terms of employment was not advanced. The court concluded:
Considering the evidence a whole and the submissions of counsel, I have concluded that Active Tire has met the required onus of establishing that a reasonable person would have accepted the opportunity to return to work at the Niagara Falls location of Active Tire when the opportunity was provided to Mr. Chevalier. Therefore, he failed to take reasonable steps to mitigate his damages, with the result that his damages in lieu of notice would be nil. In particular, I find that accepting the opportunity to return to Active Tire would not have obliged Mr. Chevalier to work in an atmosphere of hostility, embarrassment or humiliation, the critical element identified in the Evans decision for determining what is reasonable.
As noted, there was no claim for the statutory payment which would have been considerable given the plaintiff's lengthy period of employment of 33 years.
A similar conclusion was reached by the B.C. Supreme Court in Besse v Dr. A. S. Machner. The decision reflects the context and that the ratio in many of such cases is very much fact driven. The court agreed that there was a failure to mitigate by not accepting the offer of re-employment and limited the damage claim from the date of the lay-off to the offer:
These are the circumstances surrounding the imposition of Mrs. Besse’s temporary lay-off:
- Dr. Machner’s dental practice was not operating at the level achieved by its previous owner;
- Dr. Machner’s actions were motivated solely by financial considerations;
- The temporary lay-off was imposed only after Dr. Machner, in good faith, engaged Mrs. Besse and the other receptionist in an effort to find a workable solution to his concerns; and
- Dr. Machner, by his legal counsel’s letter dated February 19, 2008, acknowledged his error in imposing the temporary lay-off, offered Mrs. Besse the opportunity to return to employment on the same terms as previously applied, and to make good on any loss of income sustained in the interim.
[91] The tone of written communication from Dr. Machner to Mrs. Besse was courteous and respectful throughout.
The British Columbia Court of Appeal considered this very issue in its August 2015 decision of Fredickson v Newtech Dental Laboratory. On the facts of this case, it determined that the employee had no obligation to return to work and in so doing, overturned the trial decision of Joyce J. to the opposite effect.
The plaintiff had taken a medical leave due to personal life issues, her entitlement to which had been disputed by the employer. Upon her return to work on July 20, 2011, after an absence of roughly three months, she was then advised that she had been laid off due to insufficient work.
A letter followed from her legal counsel on September 9, 2011 asserting that she had been dismissed in July. She was then directed, on September 23, 2011, to resume her employment as of September 26, 2011, failing which it was then asserted she would be in violation of her mitigation obligation.
The action was commenced on October 18, 2011. On October 19, 2011 before the employer was aware of this proceeding, it offered to re-employ her plus pay her wage arrears from July 20, 2011 to September 26, 2011.
Again on October 25, 2011 and November 4, 2011, the company offered to re-employ her on the same terms which offer was repeated on April 19, 2012.
In the course of the defence of the proceeding, Newtech pleaded that it had not dismissed the plaintiff in July. This assertion was not changed to an admission until final argument.
The trial judge accepted the mitigation plea and allowed for damages only from the date of the lay-off to the date of the offer of re-employment, September 23, 2011.
Two reasons put forward by the plaintiff for rejecting the offer were the employer’s conduct in surreptitiously recording two telephone conversations and a discussion between the company representative and a fellow employee in which he stated that the plaintiff would be too embarrassed to return to work.
The Court of Appeal concluded that the offers of return to work were not coupled with “make whole” compensatory payments as the offers of September 23 and 26, 2011 dealt only with the income loss to the date of the offer being extended. In any event, the court stated that she was entitled to full compensation for such period as she had been dismissed. A further factor in favour of the plaintiff’s argument was the employer’s failure to admit the dismissal. Further the trial judge, the court noted, failed to address the factor of current litigation between the parties.
The Court of Appeal also spoke to the need for the employer to respect the integrity of the employment relationship:
Independent of the above, I am of the view that the trial judge was clearly wrong in failing to reflect the mutuality of trust, in the context of this employment, inherent in the relationship between employer and employee. The pertinent question when mitigation is in issue was described by Justice Bastarache as whether “a reasonable person in the employee’s position would have accepted the employer’s offer”. To determine whether this is so, in my view requires a judge to consider the full nature of the employment relationship. This includes the obligations of good faith or fidelity on the part of both the employer and employee, consistent with the nature of the work and the workplace. Most frequently questions of good faith, fidelity and fair dealing are questions that arise in the context of allegations of cause for the employee’s dismissal. The integrity of the employment relationship goes further, however. Just as trust of an employee, in the circumstances of the employment, is an important aspect for the employer, so too trust of the employer is important.
In this case, the trust factor was seen to have been eroded by the employer’s recording and use of telephone conversations with the plaintiff and the above referenced discussion with a colleague of the plaintiff.