There is a line of authority that says an employer cannot lay off an employee without a clear contractual right to do so (express or implied) and that in the absence of that contractual right, the imposition of a layoff (including a temporary layoff as permissible under the Ontario Employment Standards Act, 2000) constitutes constructive dismissal.
In Hefkey v. Blanchfield Roofing Co., the Superior Court had to decide whether or not the employee could be laid off based on a verbal agreement. The employee commenced employment with Blanchfield Roofing Co. in 2003, left in April 2009 for a period of time for another job, and then returned four months later. He worked continuously for the company until December 2015, when he was laid off from his position; which was the first time that he had been laid off during the course of his employment. He was recalled to work 3 months later, and was advised that he would have to sign a new employment contract. He did not previously have a written employment agreement as all agreements between the parties were verbal. The employee refused to sign the written contract and claimed that the employer was not entitled to lay him off and claimed constructive dismissal. He also argued that the employer had the onus of proving that there was an express or implied term in the contract that permitted layoffs.
The employer argued that there was an express verbal agreement with the employee that the conditions of his employment had always included the possibility of a layoff during the winter months if there was no work available. Ultimately, the Court accepted the employer’s position and concluded that there was an express verbal agreement that permitted layoffs during the winter months. While he had not been laid off during his employment, this was because he was married to the owner’s sister and did not diminish from the express verbal agreement that permitted layoffs. As such, there was no constructive dismissal.
In rendering this conclusion, the Court followed the decision in Jamshidi v. Dependable Mechanical Systems and determined that the employee had the onus of establishing that the contract prohibited layoffs.
In this case, the employee failed to meet that onus and it was concluded that the employer had the right to lay off the employee. While the Court ruled with the employer on the issue of a permissible layoff, it also concluded that the terms of the written employment agreement being proposed were substantially different than his previous terms, including changes to remuneration, job title, and entitlements upon termination. According to the Court, it was “vastly different” than his existing terms and conditions, which supported a constructive dismissal claim. Notably, the Court found that there was a break in service when the employee left for a few months for another job, and therefore, his length of service was 6 years, rather than 12 years. He was awarded 7 months of reasonable notice.
For employers, the Court reaffirms the validity of a verbal agreement which permitted layoffs. At the same time, the Court placed the onus on the employee to prove that such a layoff was expressly prohibited. A best practice for employers is to include an express right to layoff an employee in a written agreement in certain circumstances, which is consistent with the temporary layoff provisions as outlined in the Ontario Employment Standards Act, 2000.