Is A “Layoff” Really A Wrongful Dismissal?

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Is A “Layoff” Really A Wrongful Dismissal?

Some employment lawyers and HR professionals have been buzzing about a recent decision of the Ontario Superior Court which looked at the issue of whether a layoff could be a wrongful dismissal.  Some management lawyers have claimed that the case, Trites v. Renin Corp. is a “game changer” which makes it possible for employers to layoff most employees instead of dismissing them outright.  Even though the case is apparently not being appealed, its significance is probably being overrated.

The plaintiff, Sandra Trites, was a Division Controller for the defendant Renin Corporation.  She had been with the company for more than 6 years.    The defendant was undergoing financial difficulties.  It gave more than 50 employees lay off notices with varying recall dates.  In Trites’ case, it gave her a notice recalling her to work some seven and a half months after the start of her “layoff.”   Renin was asked to sign a consent agreeing to her “layoff” status in return for which Renin indicated that it would continue certain of her employment benefits.

The main argument was over whether an employee could claim that she was constructively dismissed if she was put on a layoff as contemplated in the Employment Standards Act, 2000 (“ESA”).  The judge wrote ” [i]n my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been rolled out in accordance with the terms of the Act.”  However, here the Court held that Renin had not put Trites on a proper layoff.  It had not continued her benefits or otherwise complied with the Act.  Trites was awarded wrongful dismissal damages of 33 weeks’ pay, which was equivalent to the time she was out of work.

It does not seem that there would have been any significant reason for Ms Trites to appeal the decision since she was awarded damages that apparently compensated her for the time she was out of work.  From the perspective of a judicial precedent, the case is ultimately an example of an employer being ordered to pay an employee wrongful dismissal damages after trying to play around with layoff rules unsuccessfully.

Employers who wish to ensure that there is no doubt about their ability to rely on the ESA lay off provisions can include clauses in their employment agreements stating the employer has the right to lay the employee off provided that it complies with the ESA.  If an employer uses this language and then puts employees on a proper lay off, there will be little that the employees can do until the lay off period expires.

F’or employees, if they are working in a workplace situation that does not seem to contemplate a “lay-off” as a term of employment, but the employees are placed on a lay-off anyways, they may still be able to claim constructive and/or wrongful dismissal.

Like the situation before the Trites v. Renin Corp. decision, these cases will often depend on the facts of the particular case including the type of workplace, the work history and whether the employer, in purporting to lay off employees, complies meticulously with the requirements of the ESA.  Many, like Renin Corp., do not.



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