Permanent layoff became temporary layoff when workers unexpectedly called back: Court

Employer believed layoff would be permanent but once things changed workers were entitled to temporary layoff benefit, court says

A group of Ontario workers who were laid off for nearly a year then rehired were on a temporary layoff and entitled to benefits under their collective agreement, the Ontario Court of Appeal has ruled.

Canadian General-Tower (CGT), a producer of coated fabrics and films for industrial applications based in Cambridge, Ont., laid off an entire shift of workers, totalling 23 people, on Oct. 29, 2004. The layoff notices indicated CGT would maintain recall rights for either 12 or 24 months.

The collective agreement the company had with its union provided a supplemental unemployment benefit plan (SUB), which allowed a weekly benefit for employees who were on temporary layoff. The SUB was added to employment insurance benefits to provide employees who qualified with 80 per cent of their regular pay.

However, the SUB and the collective agreement didn’t specifically define what constituted a temporary layoff. When CGT laid off the 23 workers, it did so because of shortage of work and issued records of employment that indicated the layoffs were permanent. Despite retaining recall rights, the company didn’t expect to have any work for them within the one- or two-year recall period and hence the layoff was likely permanent. Because of this, the company said the workers didn’t qualify for SUB benefits. It also offered career transition workshops to help the workers find other jobs.

In September and October 2005, CGT recalled the workers and all but one returned. The recalls were the result of unexpected circumstances brought on by medical leaves, long-term disability leaves and terminations. The company maintained the layoffs were originally expected to be permanent and, despite the recalls, the employees still didn’t qualify for SUB benefits.

An arbitrator disagreed with CGT’s justification, finding that though there may have been no expectation of a recall, they were called back to work 49 weeks after the layoffs, which was within their recall rights under the collective agreement. As a result, the workers could be considered to have been on temporary layoff and entitled to the SUB benefits.

CGT applied for judicial review, where the Ontario Divisional Court found the arbitrator’s decision to be reasonable and dismissed the application.

The Ontario Court of Appeal upheld both decisions, finding the arbitrator was the best qualified to interpret what was a collective agreement issue and made the right finding using an appropriate standard of reasonableness. The appeal was dismissed and CGT was required to pay SUB benefits to the workers. See Canadian General-Tower Ltd. v. U.S.W., Local 862, 2008 CarswellOnt 2836 (Ont. C.A.).

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