There are myriad reasons why a person may be laid-off from their employment and, so long as the reason provided and method of lay-off accord with the applicable provision of the Employment Standards Act, 2000 (“ESA”), then lay-off from employment is permissible. However, where employers go outside the confines of the ESA and conduct a lay-off that violates the law, then the employee in question may consider themselves to have been constructively dismissed from their employment such that they are entitled to compensation for their wrongful termination.
In this blog, we will explore circumstances under which a lay-off becomes constructive dismissal from employment.
40-Year Employee is Unceremoniously Laid-Off
The recent Ontario Superior Court of Justice decision in Scarrow v Walkey et al involved the lay-off of an employee who had begun working for the employer in 1979. In January of 2019, after more than 40 years of continuous service, the employee attended his workplace where he was advised that he was laid-off, without cause, notice or payment in lieu of employment.
The employee was advised that his lay-off was intended to be temporary and that he should expect to resume work in April of 2019. Despite this notice, the employee continued to occasionally assist the employer with work tasks for several months, although he did not receive any compensation for his efforts in this respect.
Employer Considers Employment Relationship Terminated
In May of 2019, one month after the employee was supposed to have ended his lay-off period and returned to full-time, regular employment, the employer advised him that, effective immediately, his work duties would be amended such that the employee would be expected to continue to collect unemployment insurance payments, and the employer would pay the employee a certain sum in cash to compensate for the difference. However, the money paid in cash would be much, much less than the amount the employee had previously received as his salary.
The employee refused to accept this illegal arrangement, so the employer considered the relationship to have ended and the employee to have resigned his position with the company.
At the time his employment ended, the employee was 58 years old and had worked his entire adult life for the employer. His annual salary was approximately $55,000 annually at the time of termination.
Understanding Constructive Dismissal and Lay-Off
The employee who alleges that they have been constructively dismissed from their employment bears the burden of demonstrating the same and, if successful, will be entitled to reasonable damages in lieu of notice of termination.
Constructive dismissal may take one of two forms:
- a unilateral act by an employer that fundamentally alters the essential terms of employment, or
- a series of acts that, taken together, demonstrate that the employer no longer intends to be bound by the employment contract.
Proving Constructive Dismissal
In order to prove constructive dismissal by a unilateral act, the dismissed employee must demonstrate that the employer imposed a change to the conditions of employment that expressly breaches the employment contract and “substantially alter[s] an essential term of the contract”. Such a breach may include a substantial reduction in pay, a fundamental change to the employee’s working schedule or a change in employment duties to be carried out by the employee, to name just a few.
In order to prove constructive dismissal via a series of unpermitted acts, the dismissed employee must provide evidence that would “lead a reasonable person to conclude that the employer no longer intended to be bound the terms of the contract”. Evidence in this respect may include but is not limited to proof that the employer has ceased communicating with the employee about work-related matters or that the employer has completely ignored scheduling or workload requests from the employee in question. Creation of or allowing a “poisoned work environment” to develop may also constitute constructive dismissal in certain circumstances.
The Legislative Framework Governing Temporary Lay-Offs
Significantly, the Ontario Court of Appeal has articulated that, “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 a constructive dismissal. This is so, even where the layoff is temporary.”
Section 56 of the Employment Standards Act, which governs layoffs from employment, defines the term “temporary layoff” and further delineates what constitutes termination in relation to imposition of lay-off of an employee:
“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.
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; or
(c) in the case of an employee represented by a trade union, a lay-off longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.”
Court Concludes Initial Lay-Off Constituted Constructive Dismissal
Despite the fact that there was no written employment contract in this case, the court had “no difficulty in finding that Mr. Scarrow was constructively dismissed” because he had worked exclusively for the employer from 1978 through 2019, “his entire adult working life”, and “reasonably understood his employment was for an indefinite term.”
The court was further satisfied that “the initial ‘lay-off’ was a constructive dismissal”, as it was a unilateral action imposed by the employer that fundamentally altered the employment arrangement between the parties.
Assessment of Damages for Constructive Dismissal
As the court had determined that the employee in this case had in fact been constructively dismissed from his employment, it then turned its attention to an assessment of damages suffered as a result of the employer’s breach of the law. The court first undertook to assess the amount of damages owed in lieu of reasonable notice of termination. Given the employee’s length of service, age and difficulty securing acceptable employment in the years since the unceremonious termination of his employment with the employer, the court was satisfied that 24 months’ notice ($109,980) was sufficient to compensate him in this category of damages.
In respect of the work the employee had undertaken at the employer’s behest since the imposition of his temporary lay-off, for which he had never been compensated, the court ordered payment of $5,000.
Court Awards Aggravated and Punitive Damages
In addition, further sums of $50,000 and $20,000 were awarded as aggravated and punitive damages, respectively, to compensate the employee for the atrocious manner in which his employment was terminated and to punish the employer for its callous behaviour toward their long-time employee, respectively.
Finally, the court considered a rather unusual claim of retirement allowance. The employee in this case asserted that he had long been underpaid by the employer, as he had not received a raise in many decades, but he articulated that he accepted the compensation arrangement because he had always been promised a retirement allowance from his employer. The court accepted the employee’s evidence in support of this contention and awarded the employee $250,000 as a lump-sum retirement allowance, which is the amount the employee claimed the employer promised to pay him.
Contact the Toronto Employment Lawyers at Haynes Law Firm for Trusted Representation in Constructive Dismissal Claims
The skilled employment law team at Haynes Law Firm led by Paulette Haynes helps employees seek appropriate remedies for constructive dismissal. We will assess the circumstances of your case and will advise you on whether you have a valid claim. We also represent employers, helping them identify and implement custom conflict prevention strategies to mitigate constructive dismissal claims and limit the organization’s exposure to liability. To speak with a member of our employment law team about your constructive dismissal matter, contact us online or call us at 416-593-2731.
