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What to consider when imposing temporary layoffs

How two branches of law intersected in a recent and notable case

Emond Harnden associate Kyle Shimon on temporary layoffs
Emond Harnden associate Kyle Shimon

While the pandemic is seemingly in the rearview mirror, many businesses are still grappling with the fallout.

One example is a recent temporary layoffs case that revealed some confusion around the rules around a temporary layoff and an Infectious Disease Emergency Leave (IDEL).

Kyle Shimon, an associate with employment law firm Emond Harnden, says it’s putting an unfair burden on employers.

“The Employment Standards Act, 2000 explicitly states that you can lay off employees on a temporary basis, but it actually depends,” said Shimon. 

“Employers don’t have the time or expertise to understand a gray area like this,” he said.

Where statute law and common law collide in a temporary layoffs case

The case of Pham vs. Qualified Metal Fabricators Ltd. is an example of where statute law and common law can intersect. 

“These two parallel sources of employment law usually work hand-in-hand. But where they conflict, as in the case with temporary layoffs, it becomes easy for employers to look at just one source of law,” said Shimon.

“Understandably they’ll assume an ability to do something, only to get sued and learn they are liable for damages.”

The statute law that covers temporary layoffs is the ESA, but common law, which comes from the civil justice system, also plays a role. 

“Most employers don’t realize that despite the ESA saying temporary layoffs are allowed, common law courts may take it upon themselves to call that temporary layoff a constructive dismissal and order damages against the employer,” said Shimon. 

It creates an odd situation where courts can effectively require employers to repeat a provision of the ESA in a written employment contract to protect themselves against a future claim. 

“Whether we want to agree with the court’s approach or not, it’s understandable that employers won’t realize a court may award damages against them when the ESA says they’re allowed to do something,” said Shimon.

How the pandemic muddied the waters

When COVID-19 hit, many employers were forced to temporarily layoff some or all of their employees. 

This eventually turned into an Infectious Disease Emergency Leave (IDEL), which is similar to a temporary layoff, but not quite. 

So in spite of the pandemic being largely behind us, common law court decisions that address issues around these temporary layoffs and IDEL leaves are coming out now.

The Pham vs. Qualified Metal Fabricators Ltd. case is a notable one.

Pham had been an employee for 20 years for a business that operated year-round. “They temporarily laid him off, and according to them, provided him with a sheet of paper or a letter indicating that he was being laid off,” said Shimon.

While the employer won in the first round of this case, the Ontario Court of Appeal overturned that decision in favour of the employee.

“The company’s initial defence was that Pham had been laid off for so long without saying anything, that he had condoned the layoff and relinquished his right to sue us for constructive dismissal,” said Shimon. 

The Superior Court judge agreed, but the Ontario Court of Appeal clarified two points of the law when they overturned the initial decision.

Around condonation, they said employers can’t infer from silence that an employee acquiesced to being laid off. In the letter sent to Pham, the employer didn’t offer him a choice about being laid off, he was just notified. 

Secondly, the Court of Appeal noted that Pham’s employer was a year round operation. “Meaning the employer couldn’t assume there was a common understanding about the possibility of a temporary layoff,” said Shimon.

The bottom line is that employers need to exercise more due diligence when it comes to temporary layoff provisions because each case is different. 

“What we got out of this case was that in year-round operations, the ESA is not going to provide a full defence to the employer,” said Shimon.

If you want to learn more about this or any other gray area in employment law, get in touch with an associate with Emond Harnden.