Temporary layoff not dismissal when worker agrees

Agent didn't like terms of layoff and extensions, but agreed to them

Temporary layoff not dismissal when worker agrees

Expressing displeasure about a change in the terms of employment is not the same as rejecting it. That seems to be the lesson after the British Columbia Supreme Court found that a worker was terminated following a temporary layoff with two extensions — not at the time of the initial layoff.

“You have a choice to make — if you feel you have been constructively dismissed, then you're going to have to accept the logic of that, which is you can't keep your job,” says David Edinger, a partner at Singleton Reynolds in Vancouver. “If you've been dismissed, you have a choice to make — move away from your job and assert dismissal on a constructive basis, or carry on with the job in the changed circumstances or changed contractual terms.”

Travel company hires director

Ensemble Travel Group Canada (ETL) is part of an international travel agency co-operative and is based in Toronto. It offers travel programs and services to travel agencies across Canada and the U.S. and hired the worker as a business development director for Western Canada in February 2019.

At the time of her hire, ETL stated that she was required to follow the rules and regulations in the employee handbook. However, the handbook wasn’t sent to her until May, at which point she signed it.

In March 2020, the COVID-19 pandemic significantly decreased business in the travel sector. ETL had to temporarily lay off half of its workforce in Canada and the U.S. ELT provided the worker with a layoff letter on March 25 stating that the company expected “a return to work date no later than June 29, 2020.”

The worker pointed out that there was no policy on temporary layoffs. She said that she wasn’t happy about it, but she accepted the temporary layoff due to “these exceptional circumstances.”

Three months later, ETL asked its employees to sign letters agreeing to extend the layoff to July 17. The worker said that she would agree to the extension as long as that was a final extension date. Otherwise, she could consider herself to be dismissed without cause.

The layoff was extended again, this time with a return date of Aug. 31. Despite what she had said earlier, the worker accepted the new extension.

That acceptance was a key factor in determining at what point she was dismissed, says Edinger.

“Notwithstanding that the employee said, in effect, that she thought maybe the employer didn't have the right to do this under its policies or specifically under her employment contract, she agreed. She wanted to help the company weather the storm and hoped the pandemic would end quickly so she would be able to get back to work after a short period of layoffs. But the key is that she agreed to the variation in her contract.”

However, on Aug. 24, ETL eliminated half of its positions, including the worker’s. She was paid two weeks’ salary in lieu of notice.

The worker filed an action claiming damages in lieu of reasonable notice, arguing that the termination clause wasn’t part of her employment agreement and she was effectively terminated on March 25. ELT claimed that her employment contract had been frustrated by the pandemic, adding that the employee handbook had a termination clause limiting entitlement to the minimum requirements under “applicable law.”

Contractual provisions are important for employers that want the right to temporarily lay off workers, says an employment lawyer.

Termination clause not in terms of employment

The court agreed with the worker that the employee handbook wasn’t provided at the time she started her employment and therefore the termination clause wasn’t part of her employment agreement. When ELT sent it to her three months later, it purported to amend her employment agreement, which would need fresh consideration to make it binding, said the court.

For termination clauses or other terms of employment to be valid, they must be introduced and agreed-upon before the employee begins work, says Edinger.

“[Employers should] get the employee to review and to sign off on their agreement to the applicable policies at the time the contract is entered into,” he says. “Alternatively, the court suggested that the effective argument was lack of consideration, so it might be that a policy can be agreed to at a later time with consideration being provided to the employee — although, at that point in time, employees, practically speaking, become a little more suspicious of things, and employers sometimes have to pay a little bit more.”

Although the worker claimed that her employment was terminated with the initial layoff, the court disagreed. It found that ETL believed that the evolving circumstances of the pandemic would eventually allow the worker to return to work and the worker agreed to the terms of the extensions. As a result, the termination date was Aug. 24.

The court also found that the worker’s employment contract was not frustrated. Although the travel market collapsed during the pandemic, it didn’t completely disappear and it was expected to improve in the future. ETL eliminated half of its positions but not all of them, indicating that the business was still operating.

COVID-19 has changed the way temporary layoffs are regulated and perceived.

Frustration argument ‘high bar to meet’

Edinger says that the frustration argument is rarely successful as it’s a high bar for the employer to meet.

“An economic factor such as an employer's loss of revenue isn't frustrating to an employment contract. Similarly, an employer's lack of available work also is not frustration. In this case, the highest formulation of it was applied. The court asked whether it was impossible for the employer to carry on business and noted that not all of the employees had been laid off — the business was carrying on. Given the really high test of impossibility, the court said there was no frustration.”

The court ordered ETL to pay the worker damages equal to five months’ notice. It declined to reduce the damages by 20 per cent to match two pay cuts during the layoff period, as the cuts only applied to active employees at the time.

“She wasn't an active employee and never accepted the salary reduction, which is interesting because she wasn't an active employee because she was laid off,” says Edinger. “That decision went in her favour and she was not required to accept the notice period at a reduced salary.”

The decision can serve as a reminder that employers generally don’t have the right to temporarily lay off employees without expressed permission in an employment or agreement from the employee, says Edinger.

“If you are going to impose temporary layoffs, you need to do that either pursuant to the employee's agreement or the terms of the employment contract,” he says. “And if you're not going to do it that way, you need to think about what your other options are, because the employee is under no obligation to accept a temporary layoff.”

See Verigen v. Ensemble Travel Ltd., 2021 BCSC 1934.


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