Temporary layoff, permanent dismissal

The law is clear: Absent clear language to the contrary in an employment contract, a temporary layoff repudiates a fundamental term of the employment relationship

Employers don’t have the right to temporarily layoff a worker absent explicit language in the employment contract, according to a recent decision by the Ontario Superior Court of Justice.

In Chen v. Sigpro Wireless Inc., Edward Chen was put on temporary layoff instead of being terminated without cause, a move the court said allowed Sigpro to benefit from not having to pay severance to Chen immediately.

Chen came to Canada from China in 1989. He took a job with Nortel as a software engineer specializing in software analysis and design. He stayed with Nortel until January 2001, when he decided to leave the telecommunications giant and start working for a smaller startup company.

He was offered a job with Sigpro Wireless Inc. with a starting salary of $100,000 per year. Sigpro is a research and development firm that is developing a third-generation microchip to be used as a component in wireless communication devices. Chen did well at Sigpro, and was presented with an award of excellence in June 2001, consisting of a plaque and a $500 bonus. On April 16, 2002, he received a memo from the company’s chief executive officer commending him on his performance and offering a $2,000 raise. The memo closed with the following statement: “With best wishes for a successful and long career at Sigpro.”

On Feb. 20, 2003, Chen received a phone call from a relative in China. The relative bore some bad news — Chen’s mother was dying. On the morning of Feb. 21, Chen spoke with his group leader and asked for permission to travel to China to see his mother one last time.

The group leader told Chen he saw no problem with the trip, but they would first have to discuss the project he was involved in. Chen also went to the CEO and spoke to him directly, asking to be granted emergency leave to visit his mother. The CEO asked Chen if he had enough vacation days to cover his absence. Chen did, and told him so. The CEO told Chen there should be no problem.

Shortly after speaking with the CEO, Chen was called into the office of the company’s director of programs and operations. The director told Chen he was sorry about his mother and that he would place Chen on temporary layoff so he didn’t have to take emergency leave.

Chen was shocked, confused and then angry. He was unable to understand how this could possibly happen, given his conversations with his group leader and the CEO. The director gave Chen documents to sign later that day. In them Sigpro purported to temporarily layoff Chen effective Feb. 21, 2003, and advised that “during the temporary layoff, and therefore under the Employment Standards Act of Ontario, Sigpro has up to 35 weeks in which to call you back to work.”

It also said it would continue to pay his group insurance benefits during the layoff and that at the end of the 35 weeks if Sigpro had not called him back, his insurance benefits would end and he would be entitled to any termination pay and vacation pay he may be owed. After signing the papers he was escorted from the building by the director.

Chen traveled to China and was able to see his mother before her death on March 2. When he came back he wrote to Sigpro on March 12 to inform management he had returned and was ready to work. The letter was hand delivered to the CEO, at which time Chen was told there was no work for him and if there was the company would contact him.

Chen lodged a complaint with the Ontario Ministry of Labour over the fact he had been denied emergency leave to travel to China to see his dying mother. During the course of that complaint, an issue arose as to whether or not at the material time the defendant had 50 employees or more. The Employment Standards Act provides that an employer is only required to provide emergency leave if it employs 50 employees or more.

In an attempt to resolve that issue in his favour, Chen gave the ministry a list of employees which numbered slightly more than 50. That complaint was ultimately dismissed because at the time Chen sought leave, Sigpro had fewer than 50 employees.

During the wrongful dismissal case before the Ontario Superior Court of Justice, Sigpro counterclaimed Chen had obtained and divulged detailed personnel information to the Employment Standards Office. Sigpro alleged this was highly confidential information and that it was obtained illegally and in breach of the employment agreement.

Chen said he prepared the list from his own memory and the court said during the trial he “demonstrated an almost incredible memory for the names of his fellow employees and their period of employment.”

But Sigpro expressed suspicion that it was prepared by Chen from information taken from one of the company’s computers. But the court said it was not satisfied the identity of the company’s employees was necessarily confidential. At trial the company’s director conceded it suffered no damages as a result of the information being given to the Employment Standards Office and the counterclaim was dismissed.

In terms of the layoff, the court considered whether it constituted a constructive dismissal. While the provisions of the Employment Standards Act permit the employer to temporarily layoff the employee and while, in this case, the defendant went through the form of a temporary layoff of Chen using that expression in the documentation and extending his health and dental insurance for 35 weeks, the question remained whether or not there was any express or implied term in the contract of employment that permitted Sigpro to temporarily layoff Chen.

The law is clear that the imposition of a layoff, where there is no express or implied term in the employment contract permitting such, repudiates a fundamental term of the employment contract that the employee would be employed at an annual salary for an indefinite period and thereby constitutes wrongful dismissal, the court said.

There was no reference to any such right in Chen’s contract, nor were there any discussions between him and Sigpro at the time of employment or during the course of employment from which it could possibly be implied that the parties had agreed such a right existed.

The court said Sigpro knew ahead of time it was going to let Chen go, that it didn’t tell him that when he applied for leave to visit his dying mother, and the Feb. 21 layoff was designed to benefit Sigpro by postponing severance payment to Chen. As a result the court found Chen had been dismissed without notice or cause on Feb. 21. The court awarded Chen a total of $51,326.01, consisting of five-months’ notice, outstanding vacation credits, costs incurred in mitigating damages and loss of CPP contributions.

For more information see:

Chen v. Sigpro Wireless Inc., 2004 CarswellOnt 2225 (Ont. S.C.J.)

Update: Decision upheld by appeal court

Employer says layoff, court says dismissal

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