Employer Haphazard Furlough a Constructive Dismissal

by & Lewis Waring, Licensed Paralegal, LL.B., Articled Clerk, Editor

In a recent decision by the Court of Queen’s Bench of New Brunswick, an employer was found to have constructively dismissed its employee when it haphazardly told him he was to be “furloughed” and sent him home without pay for an indefinite period of time. The employer’s behaviour was not a legitimate temporary layoff but was instead a clear breach of its obligations under its employment contract. While the employer may have intended to temporary layoff the employee in response to the serious repercussions of the COVID-19 pandemic on its business, its careless verbal notice and failure to provide a record of employment or any further information showed the employer had no real aim to perform a clearly defined temporary layoff with the legal consent of its worker.

Background

The employer ran a New Brunswick hardware store where the employee had worked for 10 years. In April 2020, the employer informed the employee that he was not to return to the workplace. The employer had not stated that the employee was being temporarily laid off. Instead, it stated verbally that the employee was being placed “on furlough” for an indefinite period. The employer failed to explain further what being on furlough meant or when it would end. No letter was ever sent to the employee giving him further information and no record of employment was received. In September 2020, the employer dismissed the employee, providing him with a salary and average commission for four weeks and his outstanding vacation entitlements.

While the employer claimed that the employee’s alleged “furlough” was part of a widespread string of temporary layoffs, its treatment of the employee was inconsistent with such an intention. While it may have been the employer’s intent to initiate such a systematic layoff, its enaction of such a policy upon the employee did not have the markings of an organized layoff. Instead, the employer’s haphazard verbal statement, one that merely informed of an indefinite period of “furlough,” a term undefined in employment standards legislation, could not be married to the idea of an employer conducting a proper widespread temporary layoff.

Far from being excusable as a defined and legitimate temporary layoff, the employer had actually performed a constructive dismissal. The employee had been constructively dismissed because, subjecting the employee to an indefinite period of no work and no pay, failing to provide him with a record of employment or other necessary documents, and leaving him in a state of confusion regarding his employment status, the employer had thus breached its obligations to the employee under the employment contract. These obligations are those that adhere to every employment contract, regardless of whether they have been explicitly written into its terms, and are inherent duties that an employer undertakes whenever they choose to hire an employee.

The inherent duty the employer had breached was its duty to uphold the rules set forth in employment standards legislation. In this case, the New Brunswick Employment Standards Act had set specific limitations on the way in which an employer could temporarily lay off its employees. While New Brunswick’s employment standards legislation did create the ability for employers to “temporary layoff an employee without notice where there is a lack of work” when the employer was subject to some unforeseen circumstance, this ability did not give the employer unchecked power to indefinitely dismiss its workforce without pay.

When an employer in New Brunswick intends to temporarily lay off its employees, it only has the ability to do so if it had written such a clause into the employment agreement with the worker. Without the employee consenting to grant the employer the ability to temporarily lay him or her off in the contract, the employer would have no legal basis to do so. The Employment Standards Act also has conditions and limits on how an employer can temporarily lay off employees who do consent to such a clause. New Brunswick’s employment standards legislation aims not to protect an employer’s right to lay off its employees but rather to protect an employee’s interests if an employer does obtain the right to perform layoffs in its employment contract.

In the end, the Court of Queen’s Bench of New Brunswick found that the employer’s conduct had no markings of a temporary layoff under the law. The employer instead had seemingly felt it had some other ability to perform something it termed as a “furlough,” which was really an imaginary ability to send home its employees without notice or any other documentation or procedural protections. The employer’s conduct was not similar to an employer that intended to temporarily lay off its employees and, instead, represented nothing more than an employer’s haphazard decision to breach its obligations under its contract with an employee, thereby conducting a constructive dismissal.

Takeaways

Employers are permitted to temporarily lay off employees throughout Canada in certain circumstances. This ability to temporarily lay off employees may be beneficial and established in certain industries that need such flexibility and pause in the employment relationship due to seasonal downturns while keeping a long-term and stable relationship with its workers. As such, industries may only have work in certain seasons or may become subject to unavoidable circumstances that interfere with their ability to provide work. The ability to temporarily lay off employees allows these affected employees to know that they will have a job to return to following a period of shortage of work.

However, when an employer encounters periods of economic recession or industry-wide setbacks to business stability such as during a widespread pandemic, such events do not give an employer an automatic ability to temporarily lay off employees. The rules for temporary layoffs do not change. Employers still need a right to use a temporary layoff in the employment contract (it must clearly permit temporary layoffs) and follow the requirements and limits in employment standards legislation. These enable an employer to lay an employee off work for a limited period of time, typically without terminating the employment relationship. The employee generally is not entitled to pay during the layoff period. In effect, the employment relationship is paused. The employer can recall the employee back to work at any time before the end of the statutory layoff period. If the employee is recalled within this time period, then the employment relationship generally continues and, in most jurisdictions, termination entitlements are not owed. Generally, if the employee is not recalled within this time period, the employment relationship is deemed to be terminated, and any termination entitlements (under statute, common law, or contract) may be owing.

Failing to abide by the above legal principle, employees may be able to allege constructive dismissal at common law, and avail themselves to statutory, contractual and/or common law notice entitlements.

If such a right to temporary layoff in an employment contract does not exist, employers should try to obtain legal counsel and the employee’s voluntary written consent before proceeding.

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