Deemed Dismissal Results in Award of Common Law Damages

To many the question “Have I been fired?” may seem a little ridiculous. Typically one knows whether or not he has been terminated. And although usually the termination itself comes as a surprise, there is little question as to certainty of the situation.

And yet, in late 2011 a case came before the Court of Appeal for Ontario that asked the question of whether or not an employee was entitled to common law damages following his “deemed” dismissal from employment. (NB: for a description of what is meant by “common law damages” see my definition in Explaining Wrongful Dismissal under Ontario Employment Law)

The case was Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831 (CanLII). As framed by the Court of Appeal for Ontario, the question to be resolved was whether “the operation of section 56(1) of the Employment Standards Act, 2000 (“ESA”) can support an employee’s claim for common law damages.”

To understand the answer one first needs to understand the question. Section 56(1)(c) of the ESA provides that an employer terminates the employment of an employee “for purposes of section 54” of the ESA if the employer lays the employee off for 35 weeks in a period of 52 consecutive weeks.

Why is section 54 of the ESA important? Section 54 is important because it is the section that prescribes that no employer may terminate the employment of an employee without providing notice or payment in lieu thereof.  

So what do we know so far? We know that an employer cannot lay an employee off for 35 weeks in a period of 52 consecutive weeks without providing that employee notice of the termination of his employment or payment in lieu thereof, in accordance with the ESA.

However as is canvassed in my post explaining Ontario employment law, the ESA only prescribes the minimum amount of notice to be provided; and that is rarely the end of the equation.

Hence the question, if one is laid off for more than 35 weeks in a 52 week period, is the employee entitled to more than just the statutory minimums prescribed by the Employment Standards Act? “Yes” said the Court of Appeal for Ontario.

Facts

The employee, Brian Elsegood, had worked for his employer for some seven years as a spring technician. The employment relationship was not governed by a written contract. He was 48 years old at the time of his termination. He was laid off twice. He was laid off for the first time on April 4, 2009, and then was recalled on June 9, 2009. He was laid off again on July 28, 2009. On January 22, 2010, the cumulative duration of the layoffs reached the statutory maximum of 35 weeks within a 52-week period. Until January 22, 2010, the employee considered that he remained on the employer’s payroll subject to recall.

Upon the length of this layoff reaching 35 weeks, Mr. Elsegood brought a claim for common law damages for wrongful dismissal in the Small Claims Court rather than claiming statutory termination pay under s. 54 of the ESA. Deputy Judge Holub awarded Mr. Elsegood $9,900 in damages reflecting a notice period of six months together with interest and costs of $2,060. The employer’s appeal to the Divisional Court was dismissed by Justice Parayeski.

Decision of the Court of Appeal for Ontario

Writing for the unanimous bench, the Honourable Justice Juriansz held that,

In my view, s. 56(1) of the ESA operates to terminate an employee’s employment in law, so that the employee may claim for common law wrongful dismissal damages. I reach this conclusion in two ways. First, I do not accept the employer’s premise that the ESA and common law operate as two independent regimes. I conclude that an employee’s employment status simply does not survive termination by a valid enactment of the legislature. Second, accepting the employer’s premise for the sake of argument, an employee laid off for more than 35 weeks in a 52-week period would be able, in every case, to claim constructive dismissal at common law. [Para. 5]

Justice Juriansz did not mince words when it came to his analysis of the function of section 56 on the employee’s employment status. Section 56(1)(c) terminates the employee’s employment status - full stop – and once that status is terminated the employee is entitled to the damages that naturally flow from the dismissal.

On the issue of constructive dismissal Justice Juriansz wrote that,

At common law, an employer has no right to layoff an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment, and would be a constructive dismissal. [Para. 14.]

In the result, the Court of Appeal dismissed the employer's appeal awarding Mr. Elsegood $15,000 for costs, or roughly 50% more than he received in damages at his Small Claims Trial.

Commentary

One would be remiss not to note that Mr. Elsegood did not have to sue for common law damages, nor did he have to accept that he was terminated. Pursuant to section 67(3) of the ESA, Mr. Elsegood could have waived his right to receive termination pay in consideration of his retention of the right of recall to his employer. As Justice Juriansz observed, because Mr. Elsegood had clearly made his election no consideration of the effect of section 67 was required in this case.

The case is thus interesting for two reasons. First, the case illustrates the fact that sometimes one may be unsure as to whether or not he has actually be terminated and thus have a case for wrongful dismissal.

Second, and more importantly, the case standards for the proposition that if one’s employment is “deemed” terminated by the effect of the Employment Standards Act, 2000, then one is entitled to not only statutory termination pay but common law damages as well.

Takeaways

The takeaway for employees should be obvious: if one has been on lay off for more than 35 weeks in any given 52 week period, and wishes to relinquish his right to recall, then one may have a case for wrongful dismissal if sufficient notice of the change in employment status is not provided.

The takeaway for employers is that if one has laid an employee off for a considerable period of time, it may be appropriate to consider providing notice to that employee that he may never be recalled.

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As always, everyone’s situation is different.  The above is not intended to be legal advice for any particular situation and it is always prudent to seek professional legal advice before taking any decisions on one’s own case.

Sean Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer. He tweets from @SeanBawden.