No implied right to or expectation of layoffs for Ontario employer

Layoffs had no precedent until 2 months previous

An Ontario company had no implied right to temporarily lay off its employees when there had been no previous layoffs and no mention of them in employment agreements, the Ontario Superior Court of Justice has ruled.

Leang Chea and Peter Michalski were was hired as draftsmen by Fox Engineering — Chea in 1991, Michalski in 1997. In 2011, Fox merged with CIMA Canada and both employees continued to work for CIMA as lead engineering technicians and mechanical designers in Ottawa. The letter of employment with which they started with the company made no reference to the possibility of temporary layoffs.

In January 2013, CIMA temporarily laid off both Chea and Michalski. CIMA indicated the layoff would not last longer than 35 weeks, the maximum period allowable under the Ontario Employment Standards Act, 2000, for temporary layoffs. They were recalled to work on June 24, 2013, after five months.

Neither Chea nor Michalski objected at the time of their layoffs, but they declined to accept their recalls as they had found other work three weeks after the layoff. They each filed a claim for constructive dismissal, claiming CIMA didn’t have a contractual right to invoke temporary layoffs. They argued there was no express or implied term of his employment contract for layoffs. Chea and Michalski also argued they couldn’t expect to be laid off as there had been no layoffs before October 2012 and no indication in their employment agreements that it was a possibility.

CIMA disputed that there was no implied term for temporary layoffs, arguing Chea was aware his layoff was temporary and all his benefits would be maintained during the layoff period. It also said Chea ought to have known temporary layoffs were possible in the consulting industry and there had been three employees laid off in October 2012. In addition, Chea had participated in a work-sharing program that temporarily reduced his pay.

The court noted that traditionally, there is no standard implied term in the employment contract allowing an employer to lay off or suspend an employee from work without pay and the common law didn’t recognize “the concepts of economic layoff, disciplinary suspension or lockout in their own right.” As a result, it must be proven there should be a reasonable expectation of layoffs.

The court found that there were no layoffs at CIMA Canada before October 2012, just three months before Chea and Michalski were laid off, so the company couldn’t say this was a reason to expect layoffs. In addition, the fact that another employee was laid off didn’t create an expectation that layoffs would suddenly become normal.

“Standing alone, it is difficult to see how the layoff of one worker can result in a unilateral amendment of the employment contracts of other workers,” said the court.

The court found there was no reason to think Chea or Michalski would have “faced embarrassment, hostility or humiliation” if they had accepted their recalls, so damages should be limited to the date of their recall notice, 21 weeks after the layoff. The workers’ new jobs off-set their damages for lack of reasonable notice and loss of overtime, vacation,and expenses, so CIMA was ordered to pay only severance payments, which amounted to $36,703 for Chea and $33,854.71 for Michalski.

See Chea v. CIMA Canada Inc., 2016 CarswellOnt 5940 (Ont. S.C.J.) and Michalski v. CIMA Canada Inc., 2016 CarswellOnt 5948 (Ont. S.C.J.).

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