Temporary Lay-Off

Can an Employer lay-off an Employee?  Does a lay-off constitute a termination of employment thereby entitling the Employee to claim damages for Constructive Dismissal?

A temporary lay-off is allowed under the Ontario Employment Standards Act, 2000 (“ESA”). Section 56.(1) (c) of the ESA states:

Section 56.(1) What constitutes termination: An employer terminates the employment of an employee for the purposes of section 54 if,

……

3. the employer lays the employee off for a period longer than the period of a temporary lay-off.

Section 56.(2) of the ESA states:

Temporary lay-off: ——- For the purposes of clause (1)(c) a temporary layoff is,

1. 1. A lay-off of not more than 13 weeks in any period of 20 consecutive weeks;
   2. A lay-off of more than 13 weeks in any period of 52 consecutive weeks and,
      1. The employee continues to receive substantial payments from the employer,
      2. 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,
      3. The employee receives supplementary unemployment benefits,
      4. The employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,
      5. The employer recalls the employee within the time approved by the Director, or
      6. 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
   3. In the case of an employee represented by a trade union…..

Therefore, given the provisions of the ESA, an Employer can temporarily lay-off an Employee provided the lay-off meets the above conditions.

An Employee’s rights, however, are not limited to the provisions of the ESA.  An Employee has far greater rights at common law. The common law views the employment relationship as a contractual one irrespective of whether there is a written employment contract. At common law, there is no such concept as a “lay-off”. Therefore, notwithstanding that the ESA allows a temporary lay-off, the Employee can elect to treat the lay-off as a termination (constructive dismissal) at common law and seek damages for lost wages. The Ontario Court of Appeal in Elsegood v. Cambridge Spring Service (2001) Ltd. 2011 ONCA stated:

“At common law, an employer has no right to lay off an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment, and would be a constructive dismissal.”

In the absence of a written employment contract allowing for a temporary lay-off, the Employee can claim constructive dismissal at common law in the event of a lay-off.  A written employment contract, however, can oust the common law.  In other words, the Employer and the Employee can contract out of the common law by entering into a written employment contract which contains a provision entitling the Employer to temporarily lay-off the Employee. The lay-off provisions must comply with the lay-off provisions in the ESA.  If there is a written employment contract allowing for a temporary lay-off in accordance with the ESA, the Employee is precluded from treating the temporary lay-off as a termination (constructive dismissal) and the provisions of the ESA govern.