'It's a cautionary tale for employers to not circumvent their obligations by playing fast and loose and hoping the employee will resign'
An Ontario employer has been ordered to pay a long-term worker 25 months’ notice plus $30,000 in punitive damages for putting the worker on temporary layoff during the pandemic and never recalling him.
The worker didn’t have a written employment agreement, which was a missed opportunity to allow such a layoff, says Nhi Huynh, an employment lawyer at Williams HR Law in the Greater Toronto Area.
“Employers should ensure that they have an express term [in an employment agreement], because a right to layoff is not going to be implied,” says Huynh. “Even with changing laws, the investment that employers make to have their employment agreements regularly reviewed and updated will likely save them a great deal in terms of liability down the road.”
Temporary layoffs during pandemic
Airways Transit Service is an airport shuttle service in the Greater Toronto Area. It hired the worker in 1992 and promoted him to vice-president in 2018, although he didn’t have a written employment contract.
The worker reported directly to the president and CEO and his position was the third highest at the company. The role involved running the company’s day-to-day business and fulfilling its role in the Airport Ground Transportation Association (AGTA).
In March 2020, the COVID-19 pandemic forced Airways to lay off all of its employees. The company relied on the provincial regulation that created infectious diseases emergency leave (IDEL), which allowed employers to lay off employees during the COVID-19 period for reasons related to the disease.
The worker continued to perform some unpaid work over the next three months, as he wanted to support the company through the difficult time. He encouraged the CEO to apply for the federal emergency wage subsidy (CEWS).
The CEO suggested that Airways wasn’t generating enough revenue to cover extra wages and asked the worker to send him the login information for all company accounts so that he could access them without the worker’s assistance.
Return to full-time work
On June 25, the worker discovered that many employees had been returned to full-time work. Over the next six months, Airways recalled 51 employees while it received nearly $800,000 from the CEWS program.
In early August, the CEO asked the worker to provide him with the company’s accounting software and login information so someone who was currently working could handle accounting responsibilities.
In February 2021, Airways missed a contribution to the worker’s group RRSP. He asked the CEO about when he would be recalled, but the CEO didn’t respond.
Statutory termination, severance pay
By May 2021, the worker realized that his layoff wasn’t temporary, so he demanded statutory termination and severance pay. The company responded with a request to return a company vehicle he was using.
The worker launched a constructive dismissal action on Aug. 26. He briefly worked two jobs, but neither worked out. He found permanent employment in a different industry in February 2022.
Airways argued that it didn’t initially recall the worker because his salary was more than the revenue it was generating during the pandemic. It also maintained that it would have recalled the worker when IDEL ended on July 31, 2022, and the IDEL regulation precluded the worker from asserting constructive dismissal for an IDEL layoff.
The Ontario Superior Court of Justice noted that s. 8 of the Ontario Employment Standards Act, 2000 (ESA), states that the act cannot affect any “civil remedy of an employee against his or her employer,” but an employee who files an ESA complaint for alleging termination or severance pay may not commence a civil proceeding for the same matter.
As the worker was seeking a civil remedy against Airways and did not file an ESA complaint, his action was not affected by the ESA, the court said. In addition, the IDEL regulation was part of the ESA regime and case law had established that the ability to pursue civil remedies was outside the ESA, said the court.
Minimum, not maximum, standards
The court also noted that the Ontario Court of Appeal had established that the purpose of the ESA was “to protect the interests of employees by requiring employers to comply with certain minimum standards.” Remedies greater than minimum standards can be pursued in court - if that wasn’t allowed, the ESA would “instead effectively become the maximum employment standard,” the court said.
“The court followed [its decisions in] Coutinho v. Ocular Health Centre Ltd. [2021 ONSC 3076] and Fogelman v. IFG [2021 ONSC 4042] in that the regulation should be read in line with the parent statute, and the ESA is meant to provide minimum entitlements,” says Huynh. “The way the employer was arguing that it should be read would mean turning the ESA into providing maximum entitlements, which is not its purpose.”
The court found that three years had passed since Airways laid off the worker with all other management employees being recalled. This indicated that the layoff was neither temporary nor related to the pandemic, said the court, adding that Airway had stated that the worker’s high salary was a factor in the decision not to recall him.
The facts showed that it was clearly not a temporary layoff related to the pandemic, says Huynh.
“When you see other employees being recalled well before the trial or even the employee asking about it, it showed that it wasn't related to COVID-19,” she says. “And they were showing that his responsibilities were clearly necessary by asking for his login credentials and all of his contact information, so that [Airways], or eventually a new hire, would perform the worker’s responsibilities - it was really a guise to not have their highest-paid employee return to work.”
No employment contract
The court also found that there was no employment contract giving Airways the right to lay off the worker, making it a constructive dismissal.
Although Airways argued that the worker acquiesced to the layoff, the court found that the initial layoff was not a termination of employment as the worker continued to perform unpaid work. The constructive dismissal happened when Airways requested the worker’s login information so it no longer had to contact him, said the court, noting that a layoff conducted in accordance with the ESA can still be constructive dismissal at common law.
The court considered that the worker had 28 years of service, was in a senior role, was 53 years old at termination, and it was a difficult time to find work in the travel industry. As a result, he was entitled to 24 months’ notice plus a one-month “bump” because of the pandemic’s effects on the job market.
“You see this [long notice period] often when you have an employee that spent the majority, if not their whole career, with one employer,” says Huynh, “And also, this worker’s position and the industry required him to have very specialized skills, so it was very difficult for him to find work - it was 23 months before he found work that was sustainable for him, and even then it was incomparable.”
The worker claimed aggravated and moral damages, but the court found that there wasn’t sufficient evidence to establish that the worker suffered mental anguish beyond the ordinary distress and hurt feelings from a dismissal – although it acknowledged that Airways’ conduct was “untruthful, misleading or unduly insensitive.”
Punitive damages warranted
However, the court found that Airways didn’t meet its duty of good faith by “stringing” the worker along and “placing him in an impossible situation” with no pay or benefits. This was “unreasonable and unacceptable behaviour” that warranted punitive damages, said the court.
“Employers really have to be aware of how they dismiss an employee - we're seeing more and more courts awarding significant extraordinary damages, whether they fall under aggravated or punitive, and employer conduct is becoming more scrutinized by the courts,” says Huynh. “It’s a cautionary tale for employers to not try to circumvent their obligations by playing fast and loose and hoping the employee will resign or tap out, as it appears in this case that the employer was trying to do.”
Airways was ordered to pay the worker 25 months’ salary and benefits in lieu of notice plus $30,000 in punitive damages.
Huynh also notes that more courts are breaking through the unwritten 24-month cap for notice damages.
“Sometimes employers might bank on the fact that they are, at most, going to be paying 24 months for their longer-service employees, but recent decisions are showing that it's becoming less possible to anticipate what the outer limit might be, especially in cases where you have long-service employees in specialized roles who find it more difficult to find work,” she says.
“Had the employer here paid out the 24 months’ notice at the beginning rather than trying to circumvent this liability, it would have saved them an additional month’s notice along with extraordinary damages and the costs of litigation, which can be quite high.”
See Chalmers v. Airways Transit Service Ltd. and Badder Capital Group Ltd., 2023 ONSC 5725.
