Where an employer changes a fundamental term of employment, this may constitute constructive dismissal. It is difficult to imagine a more fundamental term of employment than that the employee be paid his or her salary. Since COVID-19 has resulted in significant business closures, many employees have been temporarily laid-off and are no longer being paid their salary.
Typically, where no agreement (employment contract) exists that expressly indicates that the employer was entitled to layoff the employee for any period of time, the employer cannot simply place an employee’s employment status on hold without pay and without substantial benefits and expect that this will not constitute constructive dismissal. If the demotion of an employee or a reduction in pay and responsibilities of an employee constitute constructive dismissal, then surely indefinite suspension with no guarantee of recall, no salary and virtually no benefits must also qualify for the same treatment at law.
In its clear and plain wording, the Employment Standards Act (ESA) allows for temporary layoffs and an employee is not terminated (for the purpose of the statute) until and unless his or her temporary layoff exceeds the time frames allowed by s. 56(2), prior to which time he or she is not entitled to termination or severance pay pursuant to O.Reg 288/01. If the layoff does exceed the timelines, then the employee has been terminated.
That said, the temporary layoff provisions of the ESA operate separately from an employees common law rights. The ESA provisions are intended to provide protection to employees in situations where layoffs are otherwise permitted as an express term of the employment contract by limiting temporary layoffs to the maximum time periods stated in the ESA.
A layoff of more than 13 weeks in any period of 20 consecutive weeks, if the layoff 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; and
iv. the employee is employed elsewhere during the layoff and would be entitled to receive supplementary unemployment benefits if that were not so,
Section 56(4) allows an employer to layoff an employee without specifying a recall date without being considered to have terminated the employment unless the period of layoff exceeds that of a temporary layoff.
Section 56(1)(c) provides that an employer terminates the employment if it lays the employee off for a period longer than the period of a temporary layoff.
Section 54 provides that no employer shall terminate the employment of an employee who has been continuously employed for three months or more absent written notice of termination under the act or having made appropriate payment in lieu of such notice.Section 56(1) provides that an employer terminates the employment of an employee for purposes of s.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 layoff.
s. 56(1) of the ESA operates to terminate an employee’s employment in law, so that the employee may claim for common law wrongful dismissal damages. The evident purpose of s. 54 is to prevent employers from avoiding the liabilities that flow from terminating the employment of employees under the guise of placing them on indefinite layoff. The legislature has provided that when a layoff reaches 35 weeks in 52, the employee is terminated.
At common law, an employer has no right to layoff an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employer’s employment, and would be a constructive dismissal.
More specifically, a proper reading of the ESA layoff provisions requires the conclusions that:
a. it is not a termination of employment to temporarily lay off an employee so long as that temporary layoff does not exceed the definition of “temporary” – s.56(4);
b. an employer may not contract below the Act and therefore may not contract for provisions that allow that temporary layoffs exceed the timeframe set out in s.56 of the Act;
c. once a layoff exceeds the definition of temporary it is a termination of the employee’s employment pursuant to the Act and pursuant to the common-law, as the Act no longer protects the employer by displacing the common-law jurisprudence and the Act itself also deems a termination; and
d. the common-law doctrine of constructive dismissal is suspended until such time as the layoff exceeds the definition of “temporary” in the Act.
- Always seek legal advice before deciding to temporarily layoff an employee.
- Review any relevant contracts or documents pertaining to the employee you are considering laying off before doing so.
- If there is no contractual right to temporarily layoff the employee, consider speaking with the employee beforehand and document in writing any agreements made.
- If you are considering being temporarily laid off, or have been laid off by your employer, be aware of the maximum time period a lay off can last under the Employment Standards Act, and what obligations the employer has to you during the layoff itself.