Category Archives: Wrongful Dismissal

Reduction in notice period due to economic downturn?

In times of economic downturn, employers often ask about ways to reduce common law severance obligations to employees. In most cases, courts will not have much sympathy for employers. However, where there is evidence of real financial difficulty and a poor market, there is some new authority that a court will reduce the reasonable notice period to which the employee would otherwise have been entitled. In a recent case, Gristey v Emke Schaab Climatecare Inc., 2014 ONSC 1798 (CanLII), an Ontario court concluded that “economic factors” – in this case, evidence of the market and the financial health of the Company at the time of termination of the plaintiff’s employment – were relevant factors for determining what was ultimately awarded to the plaintiff.

The court found authority for this proposition in the decision of Ontario’s Court of Appeal from 1982 called Bohemier v Storwal International Inc., 1982 CanLII 1764. Despite the fairly circumscribed circumstances upon which such relief to an employer would be provided, the court in Gristey accepted that the Company’s work was sparse at the time of the plaintiff’s termination and that its business market was generally poor. The court also accepted that there was no sign of material improvement for the Company in the foreseeable future.

Interestingly, the court also noted that the Company’s evidence with respect to how it determined what to offer the plaintiff on termination was not based upon the Company’s ability to pay, but rather on what it viewed to be fair. There was also an acknowledgment during the trial by the Company that the business could have afforded continuing to pay the plaintiff some amounts after the termination date and that the Company had made a profit in the months following the termination. Despite these latter findings, the court nonetheless accepted that the Company was in financial difficulty at the time of the decision to terminate the plaintiff’s employment and agreed to discount a reasonable notice period of 12 months by one-third.

Arguments to reduce notice periods will only be available in limited circumstances and upon actual evidence of real and dire financial difficulty on the part of the Company with “no sign of material improvement in the foreseeable future”. It remains to be seen whether this case will renew a concept that has for the past many years been generally rejected.


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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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Filed under Employment, Employment Standards Act, Wrongful Dismissal

Reasonable Notice Period: 24 Months; Damages: $0?

Christopher McClelland

Two recent cases demonstrate the aggressive approach Ontario courts are taking to employees who turn down offers to mitigate their damages for wrongful dismissal by returning to work for the dismissing employer. Both cases involve claims for damages by long-service employees. Given their long tenures, the claims for damages were significant. In each case, however, the employee ended up receiving no damages and faced a significant costs award.

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