If an employee does not immediately object to being laid off, or “furloughed,” does that mean that the employee has agreed to or condoned such action?
In Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255 (CanLII), the Court of Appeal for Ontario held that an employer cannot infer consent to a layoff from mere silence.
Facts
Binh Viet Pham, the plaintiff / appellant, is a welder who began his employment with Qualified Metal Fabricators Ltd., the defendant / respondent on October 16, 2000. When he was laid off, he was 51 years of age and had worked for the respondent for almost 20 years.
Qualified Metal Fabricators manufactures metal structures through cutting, bending and assembling processes. Half of the respondent’s revenue is derived from aerospace and food services industries.
Qualified Metal Fabricators suffered significant financial losses as a result of the global pandemic. As a result, in March 2020, the respondent laid off 31 of its 140 employees including 11 of its 18 welders. Pham was one of those employees who was laid off.
On March 23, 2020 Qualified Metal Fabricators’s plant manager met with Pham and informed him of the layoff. This was the first time Pham had ever been laid off by Qualified Metal Fabricators. Qualified Metal Fabricators says the manager explained to Pham that the layoff was temporary and he hoped that Pham would be recalled by June 19, 2020.
At the meeting, Pham was provided with a “Layoff Letter”, advising that he would be placed on temporary layoff during which time his benefits would continue. The letter entitled “Notification of Temporary Layoff” provides that, “I regret to inform you that (due to budgetary considerations and recent slowdown) it is necessary to put you on temporary layoff for a period of thirteen (13) weeks”. The Layoff Letter provides that the layoff was “in accordance with [Qualified Metal Fabricators’s] work agreement”. A signature is beside Pham’s name though Pham says he did not sign the letter. No work agreement was provided to Pham at the time of layoff or in this proceeding.
On June 2, 2020, the layoff was extended by Qualified Metal Fabricators for a period of “up to 35 weeks”. It was extended again on September 23, 2020, and again on December 9, 2020 until September 4, 2021.
On September 23, 2020, Qualified Metal Fabricators provided Pham with a letter advising him that the layoff was subject to Ontario Regulation 228/20 under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”). The regulation provides that an employee whose hours of work were temporarily reduced or eliminated for reasons related to COVID-19 was retroactively deemed to be on Infectious Disease Emergency Leave (“IDEL”) rather than terminated.
Pham claimed Qualified Metal Fabricators neither sought nor received his consent to the layoffs.
In December 2020, Pham consulted a lawyer. On December 22, 2020, Pham’s counsel wrote to Qualified Metal Fabricators to advise that he was bringing a claim for wrongful dismissal.
On December 24, 2020, Qualified Metal Fabricators replied, saying that Pham signed a document agreeing to the layoff and that he hoped Pham could be recalled in a few weeks.
The Statement of Claim was issued on January 25, 2021.
Qualified Metal Fabricators Ltd., then brought a motion for summary judgment to dismiss the claim on the basis that Pham had agreed to or condoned the layoffs or alternatively, failed to mitigate his damages by not seeking new employment.
Justice Grant Dow of the Superior Court of Justice granted the employer’s motion and dismissed Pham’s claim. Pham appealed.
Decision of the Court of Appeal for Ontario
Writing on behalf of the Court of Appeal, Justice Julie Thorburn provided the following reasons for the Court’s decision to allow Mr Pham’s appeal and set aside the order dismissing his claim. [A note to the reader- several internal citations have been omitted.]
[28] Constructive dismissal can be established by either (i) the employer's breach of an essential term of the employment contract, or (ii) a course of conduct by the employer that establishes that it no longer intends to be bound by the employment contract.
[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. This is so, even where the layoff is temporary.
[30] In such cases, an employee has an immediate right to pursue a claim for constructive dismissal.
[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.
[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. The statutory 35-week temporary layoff period under ss. 56(1)(c) and 56(2) is a “minimum standard.”
[33] The ESA does not displace greater contractual or common law rights and protections. The fact that a layoff was conducted in accordance with the ESA is irrelevant to the question of whether it is a constructive dismissal.
…
[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.
…
[39] [A]s 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.
Specifically, and with respect to the issue of condonation, Justice Thorburn began the Court’s reasons with a summary of 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.
[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.
[46] Condonation is a defence to a claim of constructive dismissal and the burden is on the employer to establish it. In McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, 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.
Justice Thorburn then proceeded to consider whether Pham had 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. 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. In Belton v. Liberty Insurance Co. of Canada (2004), 2004 CanLII 6668 (ON CA), 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…[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.
[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.
[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.
Accordingly, Justice Thorburn found a genuine issue requiring a trial concerning whether Qualified had breached the terms of Pham’s employment by laying him off involuntarily, and thus, that he was constructively dismissed.
Commentary
Let’s start with the parts of the court’s decision sure to frustrate those with only a passing interest in the actual outcome of this matter.
First, this decision does not resolve any substantive issues. All it does is find that there is a genuine issue requiring a trial, meaning that the issue could not be resolved via summary judgment. It remains possible that, on a complete consideration of the record, a trial court may find that Pham had, in fact, agreed to be laid off.
Second, although apparently invited to consider the effect of Regulation 228/20, the Covid IDEL Regulation, the Court of Appeal declined to do so in this case.
Third, and somewhat relatedly, because the appeal only concerned whether disposition by summary judgment was appropriate, the court avoids any discussion of the tension between Covid layoffs and established common law rights.
With respect to the court’s observations of the law of condonation, this decision provides clear guidance to employers as to what is required to advance the position of condonation. One could certainly see how an employer, after hearing nothing for nearly nine months, might infer that an employee has accepted the employer’s position. The court’s guidance in this case is therefore helpful as to what arguments an employer can reasonably make when faced with such constructive dismissal claims.
Takeaways for Employers
The key takeaway for employers is that one’s written employment contract should afford for the right to lay employees off from employment.
While Ontario’s Employment Standards Act, 2000 has an entire regime for how to implement a layoff, as the Court of Appeal confirmed in this case, “The fact that a layoff was conducted in accordance with the ESA is irrelevant to the question of whether it is a constructive dismissal.”
Takeaways for Employees
The key takeaway for employees is that absent one’s express agreement, whether by contract or practice, generally in Ontario employers cannot lay you off from employment. The issue of whether being placed on IDEL constitutes a constructive dismissal somehow remains to be resolved, but this case certainly points in the direction that not even IDEL will prevent a finding of common law constructive dismissal.
Contact Me
Have a workplace issue? Think it might be time to update your written employment contracts? Call me. Email me. Do what works for you.
Sean Bawden is Experience. At Work.
I am an experienced employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP, which is based in Ottawa. I have appeared in courtrooms all across Ontario from Stratford, to L’Orignal, to Thunder Bay.
For 2.5 years I was in-house legal counsel providing employment law advice to one of Canada’s largest corporations and appeared in labour courts and tribunals literally the world over.
I am also been a part-time professor at Algonquin College teaching Employment Law. I have previously also taught Trial Advocacy for Paralegals and Small Claims Court Practice.
I can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.
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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
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