Worker had no contract allowing or implying employer’s right to temporary layoff
“If you're faced with a potential constructive dismissal claim, it's important to zero in on the facts of your case and [determine] whether or not the legal test applies. And every case is determined on its own facts.”
So says Nafisah Chowdhury, an employment and commercial litigation lawyer at Miller Thomson in Toronto, after an Ontario court ruled that a worker’s pandemic layoff qualified as emergency leave under employment standards legislation but was still constructive dismissal under the common law.
The now-59-year-old worker was employed by SDT North America, a Cobourg, Ont.-based supplier of specialized remote software and technical support services to customers in Canada, the US, Asia, and Latin America. He was one of 16 employees in Canada and was hired in 2006.
The worker mostly performed shipping and receiving duties with some customer support responsibilities. He didn’t have a written employment contract.
On March 22, 2020, SDT advised the worker that it was going to a skeleton staff due to pressures from the COVID-19 pandemic and he should stay home until further notice. Three days later, SDT issued a Record of Employment indicating a temporary layoff. The worker was one of six employees laid off. His manager texted him to ask that he apply for employment insurance benefits “until this virus blows itself out and there is enough work for you to come back.”
No recall from layoff
SDT did not completely shut down during the pandemic, but its sales, shipping, and receiving were significantly reduced. On March 27, SDT reached out to the worker to ask if he would be willing to return to work, which the worker responded positively. However, he wasn’t recalled.
In a text exchange with his manager, the worker said the situation was unfortunate and he hoped things returned to “somewhat of normal in the future.” The same day, the worker spoke with a colleague at SDT who had not been laid off. The colleague said that he was “stupid busy,” which the worker took to mean there was no shortage of work.
A short time later, SDT was deemed an essential service by the provincial government. On May 6, the worker contacted SDT to find out when he would be recalled, but he received no information. He followed up the next day, but to no avail.
The worker retained legal counsel and, on June 3, sued for constructive dismissal, arguing that SDT had no right to unilaterally lay him off and claiming 17 months’ notice. SDT argued that the worker’s layoff should be designated Infectious Disease Emergency Leave (IDEL) that was created by the provincial government in response to the pandemic. IDEL extended the amount of time Ontario employers were allowed to place employees on temporary layoff, if the layoff was directly related to the pandemic.
SDT also suggested that it was “implicit in the oral contract of employment that, in the specific circumstances of a global emergency and government-imposed restrictions on the economy, a temporary layoff would be reasonable and could be imposed.” If not, then the company argued that 10 months was a more appropriate notice period.
Layoff related to pandemic: court
The Ontario Superior Court of Justice found that there was nothing in the evidence that hinted at an ulterior motive for the layoff. All the communications and the timing indicated that the layoff was a direct result of the pandemic, even though SDT’s operations continued with fewer staff, said the court in finding that the layoff qualified as IDEL.
“The court looked at the full circumstances of the case, including some correspondence between the employee and the employer, and ultimately said it was satisfied that the reason for the layoff was related to the pandemic,” says Chowdhury.
The court noted that the Ontario Employment Standards Act, 2000 (ESA) states that “no civil remedy is affected by the Act” and it had previously held – in Fogelman v. IFG, 2021 ONSC 4042 and Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 - that IDEL provisions in provincial legislation “do not preclude a common law claim for constructive dismissal.” As a result, the worker could still sue for constructive dismissal even if he was on IDEL, the court said.
The court also noted that common law constructive dismissal applied “where the employment contract has no express term concerning layoffs.”
The court found that the worker was laid off without his consent and his communications with SDT made it clear that he wanted to be working, particularly since he inquired when he would be recalled. There was no doubt that the worker did not condone the layoff, said the court.
No express term permitting layoff
As for the employment contract, there were no written terms. Without an express term permitting layoffs, it could not be implied, said the court.
While SDT argued that a layoff in the specific circumstances of a global emergency was implicitly reasonable in the oral contract, the court disagreed. SDT told the worker to stay home and then laid him off without any indication of how long the layoff would be, while the company continued to employ others and was deemed an essential service. A term allowing such circumstances could not be implied in the employment contract, said the court in determining that the worker was constructively dismissed.
“The common law of constructive dismissal is that a temporary layoff is not constructive dismissal if it's permitted by a contract or, arguably, if a company policy permitted it or if there was a past practice that's well known - for example, in the context of unionized employees,” says Chowdhury. “However, if there is no contractual provision that permits temporary layoffs, and a court finds that an employee was temporarily laid off, then on the facts of that case a constructive dismissal could arise.”
“Here, the employer tried to assert that it was an implied provision - that they were allowed and permitted to temporarily lay off the employee - and the court disagreed, finding no factual basis in this case to imply such a provision into the employment contract,” she adds.
Test for constructive dismissal
Although the court didn’t do an in-depth analysis of the test for constructive dismissal, employers should be mindful of it, according to Chowdhury.
“The legal test for constructive dismissal is whether there’s been a material change to a fundamental term of the contract, and, whether the change was unilaterally imposed by the employer,” she says. “This business was deemed an essential service and a few other employees were recalled but this employee was not - and the court was of the view that there was a fundamental change that was unilaterally imposed and therefore that gave rise to the constructive dismissal.”
The court noted that the worker was older and worked for SDT for 13 years. He had no supervisory role but was responsible for certain key duties with SDT. As a result, the worker was entitled to 15 months’ notice, the court said.
SDT was ordered to pay the worker damages of $68,854.51 – 15 months’ salary and vacation pay minus income the worker earned from new employment he found during the notice period.
Although the court referred to some of its previous decisions that found IDEL can still be common law constructive dismissal, the law in this area is still unsettled, according to Chowdhury, who notes that the Ontario Court of Appeal declined to rule on the subject in Taylor v. Hanley Hospitality, 2022 ONCA 376, because it wouldn’t resolve the “fact-driven dispute” in that case.
“The question is the subject of some debate, but the point is that until a higher court, such as a Court of Appeal - or potentially even the Supreme Court of Canada if it goes that high - makes a determination on it, there's still some uncertainty on this issue.”
