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A temporary layoff can’t be a constructive dismissal?

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In a decision released last week, Justice Moore of the Ontario Superior Court appears to have altered the law of constructive dismissal as it pertains to temporary layoffs.  Before now, if an employee client came to us having been temporarily laid off, we would nonetheless have considered the possibility that the employee might have been constructively dismissed at common law. In the absence of language in an employment contract or policy allowing for the possibility of layoffs, the risk of constructive dismissal was a live one for employers, even if the layoff was temporary.

However, after the decision in Trites v. Renin Corp., employers undertaking temporary layoffs may now be inclined to breathe a little easier.  In the Trites case, the employer was experiencing significant financial hardship and explored a wide variety of cost cutting measures, including engaging in rotating temporary layoffs of employees, pursuant to the temporary layoff provisions of the Ontario Employment Standards Act, 2000 (the “ESA”). For Renin Corp., and its employees, this provided an alternative to the company closing its doors and everyone losing their jobs.

In this case, Renin Corp., argued and Justice Moore accepted that, because a layoff only converts to a termination under the ESA if it continues beyond 13 (and in certain enumerated cases, 35) weeks, there can be no constructive dismissal during this period when a temporary layoff is allowed and does not trigger a termination.  As Justice Moore stated expressly, “In 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 ESA.”

As it turned out, Ms. Trites was awarded common law wrongful damages because it was held that her temporary layoff did not comply with the requirements of the ESA.  However, the decision certainly appears to remove some of the risks associated with using temporary layoffs as a cost-cutting strategy.  As stated in the case, “desperate times calls for desperate measures”.  This may be a signal that judges are recognizing the desperate state of the economic times and are more willing to extend latitude to employers in these circumstances.

Chris Thomlinson