Employee Constructively Dismissed Because of a Temporary Layoff

Can a temporary layoff, in the absence of an express or implied contractual term authorizing such action during the term of employment, constitute a constructive dismissal? Ontario’s Small Claims Court recently answered this question in the case of Janice Wiens v. Davert Tools Inc., 2014 CanLII 47234.

Facts of the case

The employer, Davert Tools Inc. makes prototype vehicles for the automotive industry.

The 55-year-old employee, Janice Wiens, worked for Davert in a number of roles for almost 10 years before the events that led to her termination.

Davert was hit hard by the financial crisis in 2008 and implemented the federal government’s work-share program to reduce costs. From July 2009 to mid-2010, all employees agreed to work reduced hours and were entitled to collect employment insurance for the days not worked.

Subsequently, Wiens was temporarily laid off from the end of November 2010 until January 2011. She was not happy about it, but she never formally objected. She continued to receive benefits throughout the layoff. Wiens was laid off again on May 6, 2011. A record of employment was issued with a date of recall as unknown.

On August 17, 2011, the employer contacted Wiens to see if she was available for some work. She came into the office on August 18, and discussed the possibility of returning to full-time work with the company’s president. He gave her no assurance, and she considered herself terminated since her temporary layoff had lasted longer than permitted under the Employment Standards Act.

On August 19, Wiens received a letter from the employer saying that she quit her employment as of August 18 and that she was not entitled to termination pay because her benefits were continued during the temporary layoff. The employer also issued a record of employment stating that she quit her employment on August 18 after she was recalled on August 17.

Wiens applied for Employment Insurance benefits stating, “I had informed them I was terminated not quit.” Her application also stated, “Terminated per ESA after 13 wks—Employer sent an ROE stating I quit.”

Wiens also filed a wrongful dismissal claim against the employer, arguing that she was constructively dismissed after being temporarily laid off but then recalled on a day-to-day basis for an unknown period of time that was longer than the allowed 13 weeks.

The employer argued that the employee was recalled from layoff within the appropriate time period.

Decision

Did Wiens quit her employment with Davert Tools or was she constructively dismissed? If she was dismissed, what amounts to reasonable pay in lieu of notice?

The court established the following.

On August 17, 2011, Davert recalled Wiens from a temporary layoff that began May 6. The employer recalled Wiens to work on a day-to-day basis for an indefinite period. The court decided it was likely that the layoff would have lasted more than 13 weeks.

To prove constructive dismissal, Wiens had to demonstrate that Davert had breached a fundamental term of her employment agreement and that she had no intention of resigning. The court found the evidence and facts did not show she intended to resign. A resignation must be clear and unequivocal and this was not the case here.

Although there was no formal contract between the parties, the evidence shows that layoffs are common in the automotive industry, so the court found that a temporary layoff is implied in the contract. However, the implied term of the employee’s contract does not include an indefinite layoff. In this case, it was clear the parties were dealing with an indefinite period of layoff in violation of the Employment Standards Act provision.

Based on Wiens’s evidence and testimony, she was able to show the court that they were not dealing with a temporary layoff implied in the contract but an indefinite layoff, which amounted to a fundamental breach of the contract. Thus the employee was right to consider herself constructively dismissed. Wiens appropriately rejected the change in her employment agreement within a reasonable time and sued her employer for damages, per Wronko.

As a result, the employer had to pay the employee notice of termination. The court found the appropriate period of reasonable notice was eight and one half months pay in lieu of notice—more than $36,000.

However, the court agreed with the employer that Wiens should have mitigated her losses by taking whatever workdays were offered to her, and reduced the award by 20 percent, leaving a net amount of $29,466. In addition, because small claims are limited to $25,000, that was the final amount of the award.

Conclusion

An employee is on temporary layoff when an employer cuts back or stops the employee’s work when there is not enough work to do, without ending the employee’s employment. As can be seen from this case, employers need to be very careful about how they handle temporary layoffs.

Section 56 (2) of the Employment Standards Act defines a temporary layoff as being:

a) Not more than 13 weeks in any period of 20 consecutive weeks, or
b) More than 13 weeks in any period of 20 consecutive weeks, but less than 35 weeks of layoff in any period of 52 weeks, where:
     i) The employee continues to receive substantial payments from the employer,
     or
     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,
     or
     iii) The employee receives supplementary unemployment benefits, or
     iv) The employee would be entitled to receive supplementary unemployment benefits but isn’t receiving them because the employee is employed elsewhere,
     or
     v) The employer recalls the employee within the time frame approved by the director of employment standards, or
     vi) The employer recalls the employee within the time frame set out in an agreement with an employee who is not represented by a trade union. Or,

c) A layoff longer than a layoff described in (b) where the employer recalls an employee who is represented by a trade union within the time set out in an agreement between the union and the employer.

Note: An employer may put an employee on a temporary layoff without specifying a date on which the employee will be recalled to work.

An employee is considered on temporary layoff for a week if in a week, the employee receives less than one-half of the amount the employee would earn at the employee’s regular rate in a regular (non-overtime) workweek, and that week is not an excluded week.

An “excluded week” is defined in the Act to mean a week during which, for one or more days, the employee is not able to work, is not available for work, is subject to a disciplinary suspension, or is not provided with work because of a strike or lockout occurring at the employee’s place of employment or elsewhere.

The Act creates a distinction between a temporary layoff of an employee who has a regular workweek and an employee who does not have a regular workweek.

For an employee who has a regular workweek, excluded weeks are counted as part of the period of 20 or 52 weeks in paragraphs (a) and (b) above.

For an employee without a regular workweek, an employee is considered to be temporarily laid off for a period longer than the period of a temporary layoff if for more than 13 weeks in any period of 20 consecutive weeks the employee earns less than one-half the average amount the employee earned per week in the period of 12 consecutive weeks that preceded the 20-week period. In this case:

(a) Excluded weeks are not counted as part of the 13 or more weeks but are counted as part of the 20-week period; and
(b) If the 12-week period contains an excluded week, the average amount earned is calculated based on the earnings in weeks that were not excluded.

These same rules apply to the 35-week and 52-week periods.

If an employee is temporarily laid off for a period longer than a temporary layoff as set out above, the employer is considered to have terminated the employee’s employment. In general, the employee will then be entitled to termination pay in lieu of notice.

It is important for non-unionized employers to know that it is possible for a temporary layoff without a recall date, or perhaps even with a recall date, to be construed as constructive dismissal, because it may be considered a unilateral change to the employment contract. Thus, a temporary layoff could be found by a court to go to the root of the employment relationship, entitling the employee to treat the employment contract as breached by the employer. The court makes this determination based on the individual circumstances of each case. This means that an employer could be on the hook for paying damages for breach of the employment contract.

Not only should the possibility of a temporary layoff be stipulated expressly in the employment contract, but time requirements must be respected. If the employee’s temporary layoff becomes an indefinitely layoff, this is a termination.

Where the employer has a written policy communicating to employees that temporary layoffs are possible, such a right may be inferred. The policy would have to be communicated to employees well in advance of the temporary layoff so it does not appear that the policy was drafted in contemplation of an impending temporary layoff measure. How far in advance such a policy would have to be communicated would depend on the circumstances.

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