Mitigation: Statute Allows for Lay-Off: Return to Work on Expiry of Lay-off

The Issues

The broad issues are whether the statutory lay-off provisions of the relevant jurisdiction may be interpreted as conduct which creates a termination in law and secondly, presuming this to be so, whether the employee must accept a recall notice as a mitigation obligation.

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.

Issue One Statutory Lay-off as Termination

It is clear that an indefinite lay-off is an act of constructive dismissal, absent an agreement to the contrary.

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.

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.

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.

👤
About the Author: David Harris — Canadian Employment Law •
💼
LinkedIn •
🎥
YouTube

📚
Explore Other Chapters in This Book

🔙
Back to Mitigation Main Page

🏠
Return to Canadian Employment Law