Think you can’t lay off a non-unionized employee?(Legal View)

Legal innovation, reasoned argument can prevail over commonly held beliefs
By Matthew Vella
|Canadian HR Reporter|Last Updated: 06/04/2013

It has long been the view that the common law of Ontario and the Employment Standards Act 2000 (ESA 2000) operate as two independent regimes.

Lawyers have written articles and publications stating the ESA 2000 serves only to protect employees, the statute provides no rights to employers and the provisions of the act should always be read in the employee’s favour.

Following that line of reasoning, many have also written warnings that the common law does not allow for temporary layoffs and that, despite the ESA 2000 provisions allowing layoffs for 13 weeks (or in some cases 35 weeks), a common law suit for constructive dismissal could follow any temporary layoff.

There have been newspaper articles, LinkedIn updates and other sources of opinion that state the common law will provide damages to an employee who is temporarily laid off, even if the employer follows the letter of the law and complies with employment standards legislation.

Those articles, while legally sound, rely on outdated case law that is based on the predecessor to Ontario’s current employment standards legislation.

Could the legal community continue to ignore the legislature? Could employers that followed the act be liable based solely on common law principles that predate the current legislation? I didn’t think so — so I recently argued for change.

Impact of the 2008 economic crisis on employers

The 2008 sub-prime mortgage crisis in the United States and ensuing global recession had an impact on employers in every industry across Canada.

Manufacturing and production companies on this side of the border bore the brunt of the damage, particularly those that made products for new home construction and sale in the U.S.

For some companies, the fallout from the recession was brutal — with many continuing to suffer the consequences today.

Inflexible labour and employment laws left employers hamstrung and unable to cope as revenues fell.

Many unionized plants, protected by clauses in their collective agreements that allowed for the temporary reduction of their workforce, initiated layoffs.

Non-unionized employers were also forced to reduce their workforces — and they turned to the provisions of the ESA 2000 or similar provincial legislation (in Alberta, for example).

In the absence of set terms spelled out in collective agreements, these employers — despite following the provincial statutes — were faced with lawsuits alleging the temporary suspension of pay and working rights of employees constituted a fundamental breach of the employees’ (often unwritten) employment contracts.

Change was past due. It was time for the law to recognize that employee rights do not exist in a vacuum — they require people to be employed and that requires companies to stay in business.

Some measure of flexibility was needed. ESA 2000 and similar provincial legislation in Alberta provided a measure of flexibility through the temporary layoff provisions.

However, as noted above, lawyers continued to advise companies on the decline that those provisions should be ignored.

Changes needed to the common law

On May 6, I took a temporary layoff case to the Ontario Superior Court. Faced with the 1997 Divisional Court decision in Stolze — which stated that at common law a temporary layoff constitutes a termination of employment — we were faced with the task of trying to convince the court the law had changed and the common law should change with it.

We were successful on that aspect of the argument and the court made a pronouncement we hope will signal a shifting trend in employment law across this country.

The Stolze decision, and cases following it, were based on Ontario’s former Employment Standards Act.

That act did not contain what is now section 56(4), which reads:

“An employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the layoff exceeds that of a temporary layoff.”

Relying on that provision and other legislative changes, we argued the act had changed and the case law should change as well.

Of further aid was the 2011 Ontario Court of Appeal decision in Elsegood v. Cambridge Life Solutions, in which the court stated:

“Simply put, statutes enacted by the legislature displace the common law… the legislature’s action leaves no room for the continued operation of the common law respecting when an employee is terminated.”

Elsegood, Rizzo Shoes

Using these premises from Elsegood, and the Supreme Court of Canada’s statements from Rizzo Shoes (which held that the court should not read a statute in a manner that renders a part of the act senseless), we persuaded the court that the common law could no longer allow for constructive dismissal actions if a layoff complies with the provisions of the provincial statute.

We also relied on the Alberta decision of Vrana v. Procor Limited in which the Court of the Queen’s Bench ruled legislative changes in Alberta suspended the right to sue for a constructive dismissal during the period of a temporary layoff (that case was reversed on appeal, but on other grounds).

March 2013 decision

On March 8, 2013, Justice Moore of the Ontario Superior Court released his decision in Trites v. Renin Corp. The court stated:

“In my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the ESA.”

This finding is critical to employers and may provide protection from lawsuits during times of economic crisis. Flexibility is crucial for employers during hard economic times and any protection from common law suits for constructive dismissal is welcome.

The court’s pronouncement on this matter also shows that legal innovation and carefully reasoned argument can prevail over commonly held beliefs and outdated case law.

It should be noted that, at the time of this publication, the appeal period for the Trites decision has not yet passed.

Matthew Vella is founder of Vella, a Toronto-based boutique law firm dedicated to serving the interests of management in labour and employment law. He can be reached at (416) 736-9779, mvella@velllabourlaw.com or visit www.vellalabourlaw.com for more information.

Add Comment

  • *
  • *
  • *
  • *