Can an Employer Lay-Off an Employee Without a Term in the Employment Contract to that Effect?

November 6, 2013

In the recent case of Sandra Trites v. Renin Corp, the Ontario Superior Court of Justice considered whether an employer could unilaterally impose a temporary lay-off upon an employee when there was no expressed or implied term to that effect in her employment contract.

The Plaintiff Employee in this case had worked for the Defendant Employer (and its predecessor), for just under seven years when she was told in a meeting that she had been selected to be placed on lay-off.

The Court found that while the Employee may have been copied on internal e-mails regarding a lay-off policy, she did not read the policy and was unfamiliar with her rights relating to it. The Employer had failed to properly explain it to her and did not obtain her consent to any policy.

Upon the Employee leaving the lay-off meeting, having not signed the consent document presented to her, the Employer stopped paying her salary; terminated her long term disability benefits; and stopped making contributions to the Canada Pension Plan on her behalf. The Employee was then issued a Record of Employment which indicated that she was on lay-off. Prior to the 35 week lay-off period ending, the Employee brought an action against the Employer alleging that she had been constructively dismissed.

The Employer argued that the Employee had been placed on temporary lay-off as contemplated by the Employment Standards Act, 2000 (the “ESA”) and as such, she had not been constructively dismissed or terminated, either under the ESA or at common law.

The Employee argued that the temporary lay-off provisions of the ESA operate separately from her common law rights. She stated that the ESA lay-off provisions operate to provide protection for those employees who were laid off pursuant to an expressed term in their contracts.  As she had no employment agreement which provided for lay-off, the ESA provisions did not apply to her.

The Court ultimately found that the Employer had not satisfied the requirements of a temporary lay-off under the ESA as the Employee had not continued to receive substantial payments from the Employer and/or supplementary unemployment benefits and she had not been offered ongoing entitlement to medical and dental benefits as a term of the lay-off. The Court therefore found that the Employee had been constructively dismissed. The Court further stated that “there is no room remaining in law for a common law claim for a finding of constructive dismissal in circumstances where temporary lay-off has been rolled out in accordance with the terms of the ESA”.

There is an argument that as the Court’s pronouncement on temporary lay-off under the ESA and its relation to common law was not required to determine the facts of the case, that its comments on the relationship between the ESA temporary lay-off provisions and the common law is not binding authority.  As well, such a pronouncement appears to contradict a 2011 ruling of the Ontario Court of Appeal in Elsegood v. Cambridge Spring Service, 2001 Ltd. [2011] O.J. No. 6095, which held that at common law, an employer has no right to lay-off an employee absent a valid contractual agreement to the contrary and that a unilateral lay-off amounts to constructive dismissal as of the first day of the lay-off.

However, both employers and employees must still take note of this case. While it suggests that employers may no longer need to include the right of temporary lay-off in their employment contracts or manuals to allow them to effect a temporary lay-off of an employee without a termination or constructive dismissal being triggered, employers are still required to fully comply with the lay-off provisions under the ESA. Failure to do so would likely result in a finding that the employee was constructively dismissed and entitled to damages. Further, the decision remains a lone wolf in the case law and may or may not indicate the start of a movement in the direction of acknowledging the right of lay-off at common law.  Therefore, prudent practice for employers is still to ensure that the ability to effect a temporary lay-off in accordance with the ESA is included in the employment contract or the employee manual and in the case of policy, that there has been clear communication.

Trites v. Renin Corp, 2013 ONSC 2715 (CanLII)

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