Where a Door Closes, a Window Will Open…

Many people have heard the term “lay off”.  Most understand this to mean that someone has been terminated from their employment.  But that is not necessarily the case.  Pursuant to s.56(2) of the Employment Standards Act, 2000 an employer may “temporarily” lay off employees for a prescribed period of time without actually terminating their employment.  There has always been a question as to whether a temporary layoff in compliance with the ESA amounts to a termination of employment at common law.  Unfortunately, the provision itself does not provide any guidance as to whether it displaces the common law doctrine of constructive dismissal, which holds that an employer’s unilateral change to a fundamental term of employment may, in the appropriate circumstances, amount to a termination and entitle the affected employee to damages for wrongful dismissal.

Until recently, it was generally understood that unless an employee’s Employment Agreement expressly permitted temporary layoff, such a step by an employer would amount to a constructive dismissal.  The recent case of Trites v. Renin Corp. may signal a change in how the courts approach these very delicate situations.

In Trites, Justice Moore found that if the temporary layoff was carried out in compliance with the ESA, it will not amount to a constructive dismissal.  This finding is a clear departure from earlier cases which held that an employer’s attempt to lay off an employee, even in compliance with the ESA, amounted to a change to a fundamental term of employment, specifically the employee’s right to work and to be paid.

Temporary layoffs usually occur when employers are experiencing financial hardship, as was the case with Renin Corp.  Renin Corp. had tried a variety of measures to deal with its precarious financial situation.  None of those measures were able to adequately address the challenges it faced and consequently it was faced with the difficult choice of closing its business, and thereby putting 300 people out of work, or using rolling temporary layoffs as a means of further cutting its expenses.

Obviously, there must be some sympathy for the plight of employers who find themselves in similar situations. However, on the other hand, many individuals live pay cheque to pay cheque and a temporary layoff, no matter how brief, can have dire financial consequences.  There is also the possibility that an unscrupulous employer may use the temporary layoff provisions of the ESA for less than honourable purposes.  Undeniably, there are competing interests in this case and Justice Moore’s decision shows that judges can interpret the interplay between this statutory provision and the common law doctrine of constructive dismissal differently.

Unfortunately for employees, Justice Moore’s decision makes sense.  Why would s.56(2) exist unless the intention was to allow employers to employ temporary layoffs without fear of a later finding of constructive dismissal.  It ought to be noted that although Justice Moore found that a temporary layoff in compliance with the ESA will not amount to a constructive dismissal, he found that Renin Corp. had not followed the requisite steps to comply with the Act and, as a result, Ms. Trites was entitled to damages for wrongful dismissal.  The message to take away from this is that if employers want to make use of the temporary layoff provisions, they must be vigilant to follow the requirements to the letter of the law.

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