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Employment - Lay-off. Taylor v. Salytics Inc.
In Taylor v. Salytics Inc. (Ont CA, 2026) the Ontario Court of Appeal dismissed an appeal, here where the appellant employee sought "a declaration that the temporary lay-off constituted constructive dismissal and sought damages in lieu of 12 months’ notice".
Here the court considers whether the employment contract complied with the ESA on the temporary lay-off issue, which here turned on "whether the temporary lay-off clause is a termination clause for the purpose of the ESA":[5] Salytics concedes that the termination “for cause” clause in the employment agreement was invalid, which would invalidate all the termination clauses in the agreement: Waksdale v. Swegon North America Inc., 2020 ONCA 391, 446 D.L.R. (4th) 725, at para. 10, leave to appeal refused, [2020] S.C.C.A. No. 292. However, the parties differ on whether the temporary lay-off clause is a termination clause for the purpose of the ESA.
[6] The issue in this appeal is whether the application judge erred in law in determining that the temporary lay-off clause in the employment agreement was not a termination clause under the ESA.
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A. The Governing Principles
[12] The task of interpretation requires that this court consider the text, context, and purpose of s. 56 of the ESA: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, at para. 118. I agree with the parties that the applicable standard of review is correctness.
[13] The text of the legislation draws a distinction between terminations of employment as detailed in s. 56(1), on the one hand, and temporary lay-offs as detailed in s. 56(2), on the other.
[14] The common law forms the backdrop to the temporary lay-off provisions in the ESA. A unilateral lay-off, temporary or not, constitutes a constructive dismissal at common law; an employer’s legal right to lay off an employee will not be “readily implied”: Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255, 2023 C.L.L.C. 210-051, at paras. 29, 31; Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, 109 O.R. (3d) 143, at para. 14. This is the state of the law to which the enactment of the temporary lay-off provisions in the ESA responded.
[15] The relevant text is found in ss. 56(1), (2), and (4) of the ESA. Section 56(1) defines several employer acts that trigger an obligation to give an employee written notice of termination. These acts include dismissal, constructive dismissal, and lay-offs for a period longer than a “temporary lay-off”:What constitutes termination
56(1) An employer terminates the employment of an employee for purposes of section 54 if,
(a) the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her;
(b) the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period; or
(c) the employer lays the employee off for a period longer than the period of a temporary lay-off. [16] The ESA permits an employer to temporarily lay off an employee without that action constituting a termination under certain express conditions:Temporary lay-off
(2) For the purpose of clause (1) (c), a temporary layoff is,
(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;
(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,
(i) the employee continues to receive substantial payments from the employer,
(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,
(iii) the employee receives supplementary unemployment benefits,
(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,
(v) the employer recalls the employee within the time approved by the Director, or
(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; [17] Lay-offs that do not fall within the definition of a “temporary lay-off” in s. 56(2) are terminations for which written notice is required. However, for lay-offs falling within the definition of a “temporary lay-off”, written notice of termination is not required. Permitting temporary lay-offs subject to the prescribed conditions, as set out in s. 56(4), was the key industrial policy that the legislation was intended to implement:Temporary lay-off not termination
(4) An employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the lay-off exceeds that of a temporary lay-off. [18] The legislative intent is demonstrated by the legislative history.
[19] Employee termination provisions were first introduced into Ontario’s employment standards scheme in 1970 as an amendment to the then-existing Employment Standards Act, 1968, S.O. 1968, c. 35. The provisions restricted employers from terminating employees unless they provided written notice. The notice periods corresponded to employees’ years of service with the employer. Almost identically to the ESA, 1990, the 1968 written notice requirements did not apply to “a person who is temporarily laid-off, as defined in the regulations”.
[20] The temporary lay-off provisions were first introduced in Bill 96, which was enacted alongside the broader provisions on terminations as An Act to amend The Employment Standards Act, 1968, S.O. 1970, c. 45. In the first reading of Bill 96, the Minister of Labour, Dalton Bales, emphasized the dynamic nature of Ontario’s economy, noting that both growth and slowdowns are possible in a business: “Because of this, management must be free to respond to the need for change and to adjust their operations to improve productivity and efficiency. On the other hand, it is just as necessary to protect the worker against the impact of these changes.”
[21] The Minister explained that the written notice periods would help workers adjust to changing circumstances. However, he noted that the notice requirements would “not operate in such situations as … short-term layoffs”.
[22] That policy thrust was continued when what is now s. 56(4) of the ESA was added in response to this court’s decision in Stolze v. Addario (1997), 1997 CanLII 764 (ON CA), 36 O.R. (3d) 323 (C.A.). The court found that a “notice of indefinite lay-off” was deemed to be a notice of termination under s. 8(3) of the regulations of the ESA, 1990. Section 56(4) now allows employers to place employees on temporary lay-off without stating a date of recall, unless the period of lay-off exceeds the period defined as a “temporary lay-off”.
[23] This review of the legislative history supports the conclusion that the legislature has consistently distinguished between temporary lay-offs and terminations. Temporary lay-offs were always exempted from written notice requirements and, with the later addition of s. 56(4), the legislature ensured that employers could lay off employees and later recall them within the prescribed period without triggering a deemed termination.
[24] Employees may agree to express or implied terms concerning lay-offs: Pham, at paras. 29, 31. In such cases, the minimum standards of the ESA must be met. The standards which apply to temporary lay-offs are less protective than those that apply to dismissals and indefinite lay-offs.
[25] In my view, the distinction made between temporary lay-offs and terminations (and indefinite lay-offs) represents a legislative policy choice. Generally, Ontario’s employment standards legislation serves a remedial purpose: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at para. 28. However, the temporary lay-off provisions were intended to provide employers with greater flexibility in responding to economic downturns.
B. Application
[26] In the decision under appeal, the application judge found that the lay-off clause was not a termination clause and therefore, it was not invalid. He agreed with Salytics that the placement of the lay-off clause under the “Termination” heading in the employment agreement was not determinative of whether it was a termination clause. Further, the fact that a unilateral lay-off constitutes constructive dismissal at common law did not make a lay-off clause in an employment contract a termination clause. A lay-off is a termination when there is no clause in the agreement permitting the employer to lay off the employee. When there is such a clause, the lay-off is not a constructive dismissal, and therefore not a termination. Finally, the application judge noted that he was bound by the definition in s. 56(4) of the ESA, which specifically provides that a temporary lay-off without a date of recall is not termination unless it exceeds the period defined as a “temporary lay-off”. On this basis he dismissed the application.
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[30] The crux of Mr. Taylor’s argument is that, although some lay-offs are terminations and other lay-offs are not terminations, all lay-off clauses are always termination clauses since lay-offs are a “species” of termination. For this appeal, we need only decide whether temporary lay-off clauses are termination clauses.
[31] I do not agree that a temporary lay-off clause in an employment agreement is always a termination clause. Mr. Taylor’s argument contradicts the plain language of the ESA. Section 56(1)(c) states that a lay-off is a termination only if it exceeds the length of a temporary lay-off, which is defined in s. 56(2). Section 56(4) further clarifies that an employee is not terminated even if they are laid off without a specified date of recall so long as the lay-off period does not exceed that of a temporary lay-off. Therefore, a temporary lay-off is not included in the definition of termination.
[32] More particularly, I note that the temporary lay-off clause in the employment agreement at issue incorporates by reference the various provisions of the ESA governing temporary lay-offs: “In the event a temporary lay-off is ever required, it may be implemented in accordance with the requirements of the Employment Standards Act, 2000.” To interpret this as a termination clause would contradict the purpose of the ESA in permitting temporary lay-offs and would defeat the legislature’s purpose in providing some relief to struggling businesses. Mr. Taylor conceded this purpose in oral argument. The agreement allows for temporary lay-offs in accordance with the ESA, and the parties are aligned that the temporary lay-off clause is internally legal. By using the words, “temporary lay-off”, a term defined in the legislation, the parties agreed to be governed by the provisions applicable to temporary lay-offs, not terminations. To construe a “temporary lay-off” clause as a termination would not only defeat the longstanding legislative bargain achieved by the scheme, but it would also ignore the actual text of the agreement. . Pham v. Qualified Metal Fabricators Ltd.
In Pham v. Qualified Metal Fabricators Ltd. (Ont CA, 2023) the Court of Appeal considers condonement of an otherwise wrongful dismissal, here in the context of a constructive dismissal:1. The Legal Principles Regarding Condonation of Layoffs
[44] As noted above, when an employer without prior agreement lays off an employee, the employee may elect to wait and see if later he will be able to return to his previous job. Or the employee may treat the lay-off as a wrongful dismissal: Martellacci v. CFC/INX Ltd. (1997), 1997 CanLII 12327 (ON SC), 10 C.P.C. (4th) 143, 28 C.C.E.L. (2d) 75, at paras. 33-35 (Ont. Gen. Div.); see also, generally, Elsegood.
[45] An employer’s conduct that would otherwise support a finding of constructive dismissal may however be condoned by the employee, such that the employee cannot claim to have been constructively dismissed. Condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”: Greaves v. Ontario Municipal Employees Retirement Board (1995), 1995 CanLII 7288 (ON SC), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.).
[46] Condonation is a defence to a claim of constructive dismissal and the burden is on the employer to establish it: McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, 154 O.R. (3d) 451, at para. 24. In McGuinty, Huscroft J.A. for this court held at para. 31 that,[W]hile it may be reasonable to find that an employer's burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer's impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal. 2. Whether the Appellant Condoned his Layoff
[47] On the record before him, the motion judge was not entitled to find there was no genuine issue requiring a trial such that the claim for wrongful dismissal should be dismissed because, on the record before him, condonation was not established.
[48] First, assuming the signature in the Layoff Letter is the appellant’s, the letter does not constitute condonation of the layoff as there is no evidence the signature was anything more than an acknowledgment of receipt of the terms set by the respondent for the layoff.
[49] Second, although the appellant contacted a lawyer in December 2020 (not March 2020 as set out in the reasons), this was long after the layoff began, after the layoff had been extended several times, and days before he asserted his claim for constructive dismissal. As such, this is not evidence of knowledge of the ramifications of the layoff or consent to the layoff. Nor is it apparent that the respondent relied on the appellant having received legal advice in its decisions, as the respondent did not present evidence that it was even aware that the appellant received legal advice before December 22, 2020.
[50] Third, the evidence does not permit the conclusion that the appellant’s failure to object to the layoff when he was not permitted to work for the respondent constituted condonation.
[51] Determining whether an employee has objected to a fundamental change in the agreement within a reasonable period is a fact-specific determination based on the consideration of a number of factors, and the motion judge’s findings in this regard are entitled to deference: McGuinty, at para. 25. However, in considering the effect of the appellant’s silence in the face of these layoffs, the motion judge made three extricable legal errors.
[52] First, he failed to consider that an employee is permitted reasonable time to assess contractual changes before they are forced to take an irrevocable legal position: Belton v. Liberty Insurance Co. of Canada (2004), 2004 CanLII 6668 (ON CA), 72 O.R. (3d) 81, 34 C.C.E.L. (3d) 203, at para. 26 (C.A.). In Belton, Juriansz J.A. held at para. 26 that:The vulnerability of employees who believe they may have been constructively dismissed and the difficulty of making the life-altering decisions they face must be recognized. In this context, it is understandable that such employees may wish to try to adjust to the new terms and conditions without affirming the employer's right to make these changes and before taking the radical step of advancing a constructive dismissal claim. Allowing employees reasonable time to assess the new terms before they are forced to take an irrevocable legal position not only addresses their vulnerability, but also promotes stability and harmonious relations in the workplace. For these reasons, I am of the view that the appellants had no obligation to acknowledge [the employer’s] right to change the compensation schedule, and that their failure to do so did not constitute a repudiation of their agreement ... See also: Martellacci, at paras. 33-35; Andrews v. Allnorth Consultants Ltd., 2021 BCSC 1246, at paras. 47-50.
[53] Each of the layoff notices was renewed within the 35-week period set out in the ESA. In the September 23rd letter, the employer advised that the layoff was subject to Regulation 228/20 in view of the COVID pandemic. The evidence was consistent with the appellant’s wait and see approach which in turn, was the product of the respondent’s representations regarding (i) it’s intentions to recall him, and (ii) it’s invocation of the IDEL. In these circumstances, the motion judge erred in failing to consider that there was a genuine issue as to whether the appellant took a reasonable time to assess his situation before advancing a constructive dismissal claim: Belton, at para. 26.
[54] Although the motion judge was alive to the concern of reasonable time, he erred in equating silence during these reasonable periods, with condonation.
[55] Second, condonation in the face of a layoff is expressed by positive action. Positive action includes expressed consent to the layoff or expressing a willingness to work before claiming wrongful dismissal such that the employer would reasonably believe that the employee consented to the change in the terms of employment: see, for example, the indicia of condonation present in Muntean v. Enablence Canada Inc., 2016 ONSC 923, at paras. 10-13. There is no such evidence here.
[56] Third, the motion judge distinguished McGuinty, on the basis that in that case, while the employee took no steps to pursue his wrongful dismissal claim for over a year, the employee was on medical leave for stress and unable to condone the changes to his employment; the motion judge held that in this case by contrast, the appellant was not medically incapacitated. However, in my view, the principle in McGuinty stems not only from Mr. McGuinty’s stress, but from the fact that he was unable to condone changes to his employment because he was not actively working during the period, much like the appellant in the present case.
[57] Moreover, there is no requirement for an employee to ask when they might be called back to work before commencing an action for constructive dismissal: Coutinho, at paras. 54-55.
[58] As such, there is no evidence capable of supporting the motion judge’s conclusion that the wrongful dismissal action should be dismissed. On the contrary, on the evidence before us, there is a live issue as to whether there was condonation. . Pham v. Qualified Metal Fabricators Ltd.
In Pham v. Qualified Metal Fabricators Ltd. (Ont CA, 2023) the Court of Appeal dealt with a wrongful dismissal action, here grounded in an extended lay-off. Central issues were whether the plaintiff had contractually accepted the possibility of layoff or otherwise condoned them.
Here the court considers the law (and some case facts) of contractual waiver with respect to an employment lay-off:[31] Where the employment contract has no express term concerning lay offs, a right that an employer may do so will not be readily implied. The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee. “The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”: Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.
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2. Was There an Implied Term Permitting Layoffs?
[36] The appellant’s terms of employment do not expressly permit the respondent to lay him off. The question before the motion judge was whether there was an implied term permitting the respondent to lay the appellant off.
[37] The respondent argued on appeal, as it did on the motion below, that it had an implied right to lay off the appellant due to its past practice of laying off employees in 2009. The respondent further claims that by September 2020, most of the respondent’s welders had been recalled and the appellant was therefore “undoubtedly aware” that he would soon be recalled.
[38] The motion judge did not consider whether there was an implied term allowing him to be placed on a temporary layoff. The failure to consider this is a reversible error of law warranting appellate intervention: see Kurt v. Idera Inc., 2016 ONSC 3799, at para. 23 (Div. Ct.).
[39] Moreover, as noted above, the fact that other employees were laid off does not constitute an implied term of the appellant’s contract of employment permitting his layoff.
[40] The respondent relies on Hefkey v. Blanchfield, 2020 ONSC 2438, 62 C.C.E.L. (4th) 223, at paras. 46-50, for the proposition that an employer may rely on past layoff practices to establish an agreement allowing the employee to be temporarily laid off. I do not agree with such a broad assertion.
[41] First, on the record before the motion judge, the factual circumstances in Hefkey are distinguishable from this case. In Hefkey, the trial judge found that the plaintiff had not been constructively dismissed after considering the unique circumstances of the case, including the “nature of the industry, the size of the company and the layoff practices for other employees”: Hefkey, at para. 46. The considerations in Hefkey included the fact that this was a small family business that slowed down each winter; by contrast, the respondent in this case has 140 employees and operated throughout the year.
[42] Second, Hefkey is premised on the unsound legal foundation that the employee “has the onus of establishing that his employment contract did not include a layoff provision”: Hefkey, at para. 50. This is irreconcilable with this court’s decision in Elsegood, which states that the employer has the onus to demonstrate that layoffs were permitted. Otherwise, “[a]t common law, an employer has no right to lay off an employee”: Elsegood, at para. 14.
[43] Accordingly, the fact that the respondent previously laid off some of the appellant’s co-workers does not justify the result the motion judge reached as it does not constitute an implied term in the appellant’s contract to lay him off. . Pham v. Qualified Metal Fabricators Ltd.
In Pham v. Qualified Metal Fabricators Ltd. (Ont CA, 2023) the Court of Appeal dealt with a wrongful dismissal action, here grounded in an extended lay-off. Central issues were whether the plaintiff had contractually accepted the possibility of layoff or otherwise condoned them. In these quotes the court briefly summarizes the law of layoffs:[29] Absent an express or implied term in an employment agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment contract that constitutes constructive dismissal: Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, at para. 14. This is so, even where the layoff is temporary: Stolze v. Addario (1997), 1997 CanLII 764 (ON CA), 36 O.R. (3d) 323, 35 C.C.E.L. (2d) 109 (C.A.).
[30] In such cases, an employee has an immediate right to pursue a claim for constructive dismissal: Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, 71 C.C.E.L. (4th) 57, at para. 55.
[31] Where the employment contract has no express term concerning lay offs, a right that an employer may do so will not be readily implied. The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee. “The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”: Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.
[32] Sections 56(1)(c) and 56(2) of the ESA give an employee who has been laid off, 35 weeks to “wait and see” if they will be recalled before electing termination and/or severing the employment relationship by pursuing a claim for constructive dismissal. A layoff exceeding 35 weeks is a deemed termination of employment: Elsegood, at paras. 16-24. The statutory 35-week temporary layoff period under ss. 56(1)(c) and 56(2) is a “minimum standard”: Elsegood, para. 21.
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[44] As noted above, when an employer without prior agreement lays off an employee, the employee may elect to wait and see if later he will be able to return to his previous job. Or the employee may treat the lay-off as a wrongful dismissal: Martellacci v. CFC/INX Ltd. (1997), 1997 CanLII 12327 (ON SC), 10 C.P.C. (4th) 143, 28 C.C.E.L. (2d) 75, at paras. 33-35 (Ont. Gen. Div.); see also, generally, Elsegood.
[45] An employer’s conduct that would otherwise support a finding of constructive dismissal may however be condoned by the employee, such that the employee cannot claim to have been constructively dismissed. Condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”: Greaves v. Ontario Municipal Employees Retirement Board (1995), 1995 CanLII 7288 (ON SC), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.).
[46] Condonation is a defence to a claim of constructive dismissal and the burden is on the employer to establish it: McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, 154 O.R. (3d) 451, at para. 24. In McGuinty, Huscroft J.A. for this court held at para. 31 that,[W]hile it may be reasonable to find that an employer's burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer's impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal.
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