If an employer makes a fundamental change to an employment contract, it may be possible for the employee to bring a claim for constructive dismissal. However, if the employee waits too long to resign, they may be deemed to have condoned the change and be unable to bring a claim.

This article looks at constructive dismissal in the context of layoffs and how long the employee has to object before they will have condoned the change. We also look at a recent decision of the Court of Appeal for Ontario in which an employee argued that he had been constructively dismissed after he was laid off during the COVID-19 pandemic.

A layoff might constitute a constructive dismissal

There are two ways that an employee can establish that they have been constructively dismissed:

• the employer has breached an essential term of the employment contract; or
• the employer has engaged in a course of conduct that shows that it no longer intends to be bound by the contract. 

For the first route, the change to the employment relationship needs to be significant and instituted by the employer on a unilateral basis. Putting an employee on a temporary layoff may meet these requirements unless the employment contract permits the employer to lay off the employee, either expressly or impliedly. Therefore, an employee may be able to pursue a constructive dismissal claim if they have been laid off. 

The ESA deems certain layoffs to constitute termination

Section 56 of the Ontario Employment Standards Act (ESA) states that an employer terminates an employee if they lay them off for longer than “a temporary lay-off,” which is defined to include a layoff of fewer than 35 weeks in any period of 52 consecutive weeks. This means a layoff of 35 weeks may be deemed a termination of employment. Prior to this, the employee can wait and see if their employer recalls them. 

Despite these rules, courts have decided that a layoff being conducted in accordance with the ESA does not impact an employee’s common law rights, including the ability to claim constructive dismissal. 

The COVID-19 pandemic brought certain changes to the ESA in respect of layoffs. The Government made a new regulation that deemed, for a specified temporary period, certain employees to be on unpaid infectious disease emergency leave (IDEL). This applied when hours of work were temporarily reduced or eliminated for reasons related to COVID-19. The regulation meant that such employees were not considered to be laid off or constructively dismissed. 

Condoning a layoff prevents an employee from bringing a constructive dismissal claim

In order for an employee to treat a layoff as a constructive dismissal, they must not have condoned the change. For the employee to have condoned the change, the employer needs to believe, viewed from an objective perspective, that the employee consented freely to the change. The employer needs to prove that the employee condoned the change to the employment relationship if it wishes to rely on this as a defence to a constructive dismissal claim. 

If the employee objects to the significant and unilateral change in their employment terms within a reasonable time, they will not have condoned the situation. 

Plaintiff started court proceedings after his layoff was extended three times

In Pham v Qualified Metal Fabricators Ltd., the plaintiff was a welder that had worked for his employer for about 20 years. As a result of the COVID-19 pandemic, the defendant employer laid off 30 employees in March 2020, including most of its welders, including the plaintiff. 

The plaintiff’s manager said that the layoff was temporary, and the plaintiff was given a letter stating that it was for 13 weeks. In June 2020, the defendant extended the layoff for up to 35 weeks. The layoff was extended again in September and December, with the employer stating that it was subject to the IDEL regulation.

In December, the plaintiff spoke to a lawyer, and he commenced proceedings against the defendant the next month. In February 2021, shortly after the plaintiff got a new job, the defendant sent a letter recalling him. 

Defendant argued the plaintiff had condoned the layoffs

The defendant applied to the court to have the claim dismissed, arguing that the plaintiff had condoned his layoff. 

The employer argued that the plaintiff’s employment contract had an implied term permitting layoffs. It also claimed that the plaintiff condoned the layoffs by signing a letter, seeking legal advice and not protesting against the layoff. 

The motion judge agreed with the defendant and dismissed the plaintiff’s action. The plaintiff appealed. 

There is a live issue as to whether there was condonation; constructive dismissal claim to proceed to trial

The Court of Appeal decided that the fact that the defendant had laid off other workers did not imply a term permitting layoff into the plaintiff’s contract. 

The Court also decided that the record did not establish that the plaintiff had condoned the layoff. Signing a layoff letter proved no more than an acknowledgment of receipt. It also said:

“an employee is permitted reasonable time to assess contractual changes before they are forced to take an irrevocable legal position.”

The Court decided there was a genuine issue as to whether the plaintiff had taken a reasonable time to assess his situation before advancing a constructive dismissal claim. There was no evidence that the plaintiff had taken positive action to consent to the layoff. There was also no requirement for the plaintiff to ask his employer when he might be called back to work before commencing an action for constructive dismissal.

The Court ordered the plaintiff’s claim to continue to trial, finding that there was a genuine issue as to whether the plaintiff had condoned the layoff or whether he had been constructively dismissed. 

Contact Haynes Law Firm in Toronto for Guidance on Constructive Dismissal

If you are either an employee that is considering resigning and claiming constructive dismissal, or an employer seeking to avoid allegations of constructive dismissal, you need timely advice from an experienced employment lawyer. The Haynes Law Firm is here to assist you. Please contact us online or call us at 416.593.2731.