No Implied Term in Employment for Layoff for COVID State of Emergency

By now one might have thought that the issue of whether an employer had the legal right to layoff an employee in the face of the COVID 19 pandemic would have been resolved. And yet in the case of Webb v. SDT North America, 2023 ONSC 7170, heard June 12, 2023, with further written submissions delivered September 8, 2023, and September 29, 2023, with reasons for decision released on December 19, 2023, the court was once again asked the question of whether a “COVID layoff” constituted as dismissal.

Court of Appeal Clarifies Test for Condonation of Layoff

If an employee does not immediately object to being laid off, or “furloughed,” does that mean that the employee has agreed to or condoned such action?

In Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255 (CanLII), the Court of Appeal for Ontario held that an employer cannot infer consent to a layoff from mere silence.

Employee’s Refusal to Work Not Wrongful Dismissal

If an employee leaves work and refuses to return until certain demands have been met, and if the employer is unwilling to meet those demands, has the employee been fired, has she quit, or what happened?

In Anderson v. Total Instant Lawns Ltd., 2021 ONSC 2933 (CanLII), Madam Justice Julianne Parfett of the Ontario Superior Court held that the employee had not been fired; her own actions had repudiated the contract.

Infectious Disease Emergency Leave Does Not Oust Common Law Constructive Dismissal

Does Infectious Disease Emergency Leave under the Employment Standards Act, 2000, S.O. 2000, c.41 oust the common law of constructive dismissal or were employees ostensibly placed on leave actually terminated?

In Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 (CanLII), Justice David A. Broad of the Ontario Superior Court ruled that the regulatory changes did not oust the common law, meaning that employees objecting to be placed on IDEL could still sue for constructive dismissal damages.

Employees Cannot Sue for Constructive Dismissal Caused by Chronic Mental Stress: WSIAT

Can an employee in Ontario sue for constructive dismissal, if the reason the employee was forced to leave employment was because of chronic mental stress, caused by workplace bullying or harassment?

According to a 2019 “right to sue” decision from the Ontario Workplace Safety And Insurance Appeals Tribunal, Morningstar v. Hospitality Fallsview Holdings Inc. (Decision No. 1227/19), 2019 ONWSIAT 2324 (CanLII), the answer is “no.”

When Worlds Collide – The Evolution of Employment Law Principles in the Termination of Independent Contractor Relationships

It is remarkable how much the law can change in as little as 14 years. In 2005, Justice Kathryn N. Feldman authored reasons for decision on behalf of the Court of Appeal for Ontario in the case of 1193430 Ontario Inc. v. Boa-Franc Inc., 2005 CanLII 39862 (ON CA). The essential holding of that case is that, “Employment law concepts such as just cause should not be imported into commercial law context to govern distributorship agreements.”

14 years later, in the case of Barresi v. Jones Lang Lasalle Real Estate Services Inc., 2019 ONCA 884 (CanLII), the two worlds could not be more intertwined.

Peppercorns Still Valid Consideration for Fundamental Changes

What sort of consideration is required for an employer to make fundamental changes to the terms of an employee’s employment agreement?

In the case of Lancia v. Park Dentistry, 2018 ONSC 751, the Honourable Justice Andrew J. Goodman of the Ontario Superior Court of Justice confirmed the longstanding legal principle that a “peppercorn” will do. The court also confirmed that consideration for a new agreement is not required where the employer provides reasonable notice of the termination of the existing agreement.

Claiming Constructive Dismissal as an Independent Contractor

Can independent contractors claim damages for constructive dismissal? In a decision released March 7, 2018 by the Ontario Superior Court of Justice, Barresi v Jones Lang LaSalle Real Estate Services, Inc., 2018 ONSC 837, the answer to that question was essentially yes.

Employers May Not Make Changes to Terms of Employment During Working Notice Period

In the 1997 movie “Wag the Dog” the spin doctors hired to get the President re-elected release an ad campaign with the slogan “Never change horses in mid-stream.” That idiom serves as a powerful and important reminder for employers that might seek to change the terms of an employee’s employment during a period of so-called “working notice.”

In a short decision released by the Court of Appeal for Ontario, Nufrio v. Allstate Insurance Company of Canada, 2017 ONCA 948 (CanLII), Ontario’s top court reinforced this principle.

The Legality of Taking Away Paid Breaks and Benefits

Unless one has been living under a rock, and perhaps even if one has, it would be hard to have missed the controversy surrounding the decision of one Tim Horton’s franchise to make certain changes to the terms of its employees’ employment. Because the internet needs the opinion of one more person, let’s have a look at what happened and the legality (not necessarily the morality) of same.

The Facts

As widely, and I mean widely, reported in the media, some time in early January 2018, Ron Joyce Jr. Enterprises Limited, a franchisee of Tim Hortons located in Cobourg, Ontario circulated a memorandum to its employees advising them as follows:

As one can plainly see, the employer made three changes to the terms of employment:

1. Breaks would no longer be paid;
2. Incentives such as paid days off were cancelled; and
3. Employees would now be required to contribute towards the costs of their employer-sponsored benefits.

The Legal Question

The legal question that arises from such facts is: Can an employer just do that? Distilling that question further, there are really four fundamental legal questions that need to be answered:

1. Can an employer make any unilateral, fundamental change to the terms of an employee’s employment without notice?
2. Can an employer really take away paid breaks?
3. Can an employer really take away benefits?
4. If the answer to those questions is no, what can an employee do about it?

The Right to Make Unilateral, Fundamental Change

Since the story broke about a week ago, I have been arguing that the employer had the legal right to make unilateral, fundamental changes to the terms of the employee’s employment. I based that position on the decisions of the Court of Appeal for Ontario in both Wronko v. Western Inventory Service Ltd., 2008 ONCA 327 and Kafka v. Allstate Insurance Company of Canada, 2012 ONSC 1035 (Div Ct).

In Wronko, former Chief Justice of Ontario Warren Winkler wrote the following:

[24] The basic premise underlying the individual contract of employment is that it continues as long as both parties agree. In common parlance, the employment of persons is "at will"; that is, either party has a right to terminate the employment relationship without cause. However, the use of the expressions "at will" and "a right to terminate" must not obscure the reality that the employer's right to terminate an employee without cause is a breach of contract that carries with it consequences for the employer, both under statute and at common law. The use of these expressions also must not obscure the reality that an employer's unilateral change to a fundamental term of an employment contract constitutes a repudiation of the contract. An act of repudiation carries consequences, which depend on how the employee responds to the repudiation.

…

[33] In [Hill v. Peter Gorman Ltd., 1957 CanLII 393 (ON CA)], Mackay J.A. identifies three options that are available to an employee when an employer attempts a unilateral amendment to a fundamental term of a contract of employment. They may be summarized as follows.

[34] First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.

[35] Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term. This course of action would now be termed a "constructive dismissal", as discussed in [Farber v. Royal Trust Co., [1997] 1 S.C.R. 846], although this term was not in use when Hill was decided.

[36] Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms.

As a lawyer in private practice, I have frequently relied on Justice Winkler’s comments in paragraph 36, “the employer may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms” to assist employers in varying fundamental terms of employment.

In order to be successful, however, the employer must ensure that it has provided “reasonable notice” of the change to the employee.

To this point must be added what the Divisional Court said in Kafka:

[45] … a fundamental change does not amount to a constructive dismissal where the employer provides the employee with reasonable notice of the change.

In short, in my opinion, so long as: (a) the employer provides reasonable notice of the unilateral, fundamental change to the employee before the change takes effect; and (b) the final result remains legal, employers may make unilateral, fundamental change to the terms of an employee’s employment.

Must Statutory Severance Be Provided?

When I posited this position on twitter, some rebuffed, taking the position that statutory severance would have to be paid:

The difference is severance pay. When an employer changes terms of an #employment agreement that's tantamount to discharge, an employer must pay full severance pay and then re-hire employee under new terms. Loss of health and dental benefits for #MinimumWage workers is too much.

— David Michaels (@davidmichaels) January 7, 2018

First of all, I have previously covered off the position that, “When an employer changes terms of an employment agreement that's tantamount to discharge” – I am not suggesting that employers be coy about the discharge, I strongly encourage the actual termination of the employment agreement, so as to avoid any ambiguity as to the situation.

Second, to the suggestion that “severance pay” must be provided, it is first important to recall that, not all employees are entitled to severance pay.

Next, even if the employee has been employed for 5 or more years and the employer’s payroll exceeds $2.5 million a year, we must consider what constitutes severance of employment. Section 63 of the Employment Standards Act, 2000 provides the answer to that question:

63 (1) An employer severs the employment of an employee if,

(a) the employer dismisses the employee or otherwise refuses or is unable to continue employing the employee;

(b) the employer constructively dismisses the employee and the employee resigns from his or her employment in response within a reasonable period;

(c) the employer lays the employee off for 35 weeks or more in any period of 52 consecutive weeks;

(d) the employer lays the employee off because of a permanent discontinuance of all of the employer’s business at an establishment; or

(e) the employer gives the employee notice of termination in accordance with section 57 or 58, the employee gives the employer written notice at least two weeks before resigning and the employee’s notice of resignation is to take effect during the statutory notice period.

At best, the only applicable circumstance would be a finding that a termination of an employment agreement constitutes the employer “dismissing” the employee. In my opinion, termination of an employment agreement does not necessarily constitute termination of the entire employment relationship. On this point, those interested would be prudent to consider the decision of the Court of Appeal for Ontario in Chapman v. GPM Investment Management, 2017 ONCA 227, about which I blogged in my post: Failure to Pay $300,000 Bonus a Breach of Contract Only and Not a Constructive Dismissal: ONCA.

Moreover, even if statutory severance must be paid, such payment constitutes a down payment against future obligations: ESA, ss 65(8), para 3. So it really doesn’t matter too much to the employer in any event.

Taking Stock of Where We’re At

So, at this point what we know is: employers legally can make unilateral, fundamental changes to the terms of their employee’s employment, so long as: (a) reasonable notice is provided; and (b) the result remains legal. There is some debate as to whether statutory severance must be paid to eligible employees, and while my answer is an unequivocal “no”, the good news for employers is that if the same is paid, then credit for such payment will be given at the time of actual dismissal.

Taking Away Paid Breaks

As I have stated several times, the end result after the changes are made must be legal. The same begs the question of whether taking away an employee’s paid break is legal.

Shocking as it may be to some, there is no statutory obligation under the Employment Standards Act, 2000 to provide employees with any form of paid break.

The statutory obligation to provide a break is found in sections 20 and 21:

20 (1) An employer shall give an employee an eating period of at least 30 minutes at intervals that will result in the employee working no more than five consecutive hours without an eating period.

(2) Subsection (1) does not apply if the employer and the employee agree, whether or not in writing, that the employee is to be given two eating periods that together total at least 30 minutes in each consecutive five-hour period. 2000, c. 41, s. 20 (2).

21 An employer is not required to pay an employee for an eating period in which work is not being performed unless his or her employment contract requires such payment.

I have written further about the subject of paid breaks in my post: Catching a Break.

In the case of the Cobourg franchise, I actually take some issue with any shift shorter than 5 hours and whether the employer can impose a 15-minute, unpaid break. For the most part, however, this change is legal.

Taking Away Paid Benefits

Similar to paid breaks, there is no statutory obligation for an employer to provide an employee with any form of health and dental benefits. Moreover, it is not illegal for an employer to require an employee to contribute towards the cost of same.

This change, while undeniably fundamental is clearly legal.

Remedy

Let us presume for a moment that the changes made to the employees’ employment were significant enough to justify the employee in treating the employment relationship as at an end. If the employer failed to provide reasonable notice of the change, what can the employee do?

First of all, it is important to recall what Justice Winkler said in Wronko:

[34] First, the employee may accept the change in the terms of employment, either expressly or implicitly through apparent acquiescence, in which case the employment will continue under the altered terms.

[35] Second, the employee may reject the change and sue for damages if the employer persists in treating the relationship as subject to the varied term. This course of action would now be termed a "constructive dismissal", as discussed in [Farber v. Royal Trust Co., [1997] 1 S.C.R. 846], although this term was not in use when Hill was decided.

[36] Third, the employee may make it clear to the employer that he or she is rejecting the new term. The employer may respond to this rejection by terminating the employee with proper notice and offering re-employment on the new terms.

Put more simply, the employee’s options are these:

1. Accept the change;
2. Reject the change, leave, and sue for “constructive dismissal”, plus perhaps extraordinary damages such as aggravated damages and/or punitive damages; or
3. Tell the employer that the employee is rejecting the change, insist on the original terms of employment, and see what the employer does.

If the employee chooses to balk at the situation, then the employee’s first step is to leave employment, taking the position that he or she has been “constructively dismissed.” Constructive dismissal is a complicated legal doctrine that is much beyond the scope of this post. Those interested in this concept would be prudent to consider my post: Supreme Court of Canada Confirms that There are Two Paths to Constructive Dismissal.

In short, a finding that the employee has been constructively dismissed entitles the employee, at a minimum, to payment in lieu of notice. For more employees employed in minimum wage, retail or food-service positions, that may not amount to very much.

What Can Be Done?

Some have suggested that the law should have been changed to prohibit employers from changing the terms of an employee’s employment. Respectfully stated, I am not sure how that can be accomplished so long as employers retain the right to terminate employment without cause.

On that point, if the Ontario government wanted to provide real protection to workers it would amend the Employment Standards Act, 2000 to make its termination provisions similar to those of the Canada Labour Code.

As the Supreme Court of Canada’s decision in Wilson v. Atomic Energy of Canada Ltd., [2016] 1 SCR 770, confirmed, most employees employed pursuant to the terms of the Canada Labour Code cannot have their employment terminated absent just cause.

Amending the ESA to mirror the Canada Labour Code would make it much harder for employers to not only terminate employment, but likely make fundamental changes to the terms of employment.

Although Bill 148 made several changes to the ESA, a full review of which you can find in my post Bill 148 and Changes to the Employment Standards Act, 2000, no changes were made to that law’s termination provisions.

Contact Me

If you are an employer and you are thinking about making changes to the terms and conditions of your employees' employment, such as by introducing new policies, better to speak with an experienced employment lawyer first.

If you are an employee and your employer has introduced new rules without providing notice of the change, or anything else, and you don't intend to abide by such rules, best to speak with a lawyer first.

Contact me. I can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.

Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. For 2.5 years he was in-house legal counsel providing employment law advice to one of Canada’s largest corporations. He has also been a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.

--

As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.

Photo Credit: (c) istock/MatthewSinger

Failure to Pay $300,000 Bonus a Breach of Contract Only and Not a Constructive Dismissal: ONCA

(c) istock/Jummie

Can an employer breach a rather fundamental element of an employee’s employment contract (to the tune of over $300,000) without triggering a constructive dismissal?

In a decision released March 21, 2017, Chapman v. GPM Investment Management, 2017 ONCA 227, the Court of Appeal for Ontario said “yes.”

Trial Judge Finds Mitigatory Earnings too Insignificant to be Deducted from Wrongful Dismissal Award

The application of the duty to mitigate to the post-termination earnings of wrongfully dismissed employees is probably the most reviled subject that an Ontario employment lawyer will have to discuss with his employee clients. (By contrast, it is a favourite subject of employers.) In short, the doctrine essentially provides that an employer is entitled to the set-off of any post-termination dollars earned by the dismissed employee during the reasonable notice period. As the case of Davidson v. Tahtsa Timber Ltd., 2010 BCCA 528 demonstrates, sometimes by virtue of an employee’s success in finding new employment, an employee can be completely shut out from being awarded anything notwithstanding being wrongfully dismissed.

But what happens when an employee takes a new job not so much to “mitigate her damages”, but rather to survive? More to the point, what if that new position is so much beneath the wrongfully dismissed employee’s previous position that to deduct such earnings would work a disservice to the employee?

In the case of Brake v PJ-M2R Restaurant Inc., 2016 ONSC 1795, the Honourable Justice Kevin B. Phillips of the Ontario Superior Court of Justice sitting at Ottawa held that a wrongfully dismissed employee’s ability to find employment did not take away from the loss she suffered from being dismissed without cause. Moreover, her new position, that of a cashier, was so substantially inferior to the managerial position she held with the defendant that, “the former does not diminish the loss of the latter.” As a result no deduction was applied on account of the mitigatory earnings.

The Curious Case of Damages without Liability

I will start this post by saying that the content of this post will be different from what I usually write. Typically, my posts start with a question, which is then answered by the content. However, this time it is content that leaves me with a question.

On February 5, 2016, the Honourable Justice Timothy D. Ray released his reasons for decision in the case of Muntean v Enablence Canada Inc., 2016 ONSC 923 (CanLII). The “catchwords” for the decision are “lay-off notice — constructive dismissal — treat the lay-off — temporary lay-off — voicemail”. “Cool,” I thought, “a recent, local decision in my practice area. I’ll read this.” So I did.

With much respect to Justice Ray, after reading the decision and discussing it with others I simply cannot make sense of it. I like to fancy myself someone who knows a thing or two about Ontario employment law, but in this case I am simply at a loss.

If someone can explain to me why damages were awarded in this case and for what, I would be most appreciative.

Employment Standards Act does not Oust Common Law of Constructive Dismissals for Layoffs: ONCA

Do the statutory provisions in Ontario's Employment Standards Act, 2000 governing the ways by which an employer may temporarily lay-off an employee oust the application of the common-law doctrine of constructive dismissal during the temporary lay-off period?

According to a decision from the Court of Appeal for Ontario, Motion Industries (Canada) Inc. v. McCarthy, 2015 ONCA 224 (CanLII), the answer is “no.”

Supreme Court of Canada Confirms that There are Two Paths to Constructive Dismissal

Under what set of circumstances can a non-unionized employee claim to have been constructively dismissed?

In a recent decision from the Supreme Court of Canada, Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, Canada's top court confirmed that there are two possible ways by which an employee can be constructively dismissed.

How Employers Can Make Fundamental Changes to Terms of Employment

How can an employer make fundamental changes to an employee’s employment? Sometimes an employer will need to make a fundamental change to the terms of an employee’s employment, this may include changing the number of hours that an employee works, the times during which an employee will work, the position that the employee will hold, or the amount of money that the employee may receive.

While the easiest way to change the terms of an employee’s employment is to get the employee to agree, not all employees will be willing to do so. In those cases, employers will need to ensure that they follow the law concerning unilateral fundamental changes.

BCCA: Refusing to Allow Employee to Work during "Working Notice" is Termination

Has an employee who is ‘walked to the door’ by his employer been fired or has he simply been subjected to a fundamental change in employment?

What if the employee was provided with “working notice” before being escorted to the door? Can someone be both: (a) escorted out of the building, told not to return, and announced as having “left the company”; and (b) an employee of that company at the same time? Or are those two positions mutually exclusive? Those were the question the Court of Appeal for British Columbia was asked to answer in the case of Allen v. Ainsworth Lumber Co. Ltd., 2013 BCCA 271 (CanLII).

ONCA: No Duty to Mitigate Unless Offer Made After Termination

Where an employer’s restructuring serves a legitimate business interest and is not merely a pretext for terminating an employee, should that employee be obliged, as part of his duty to mitigate, to return to work for the same employer? According to a recent decision from the Court of Appeal for Ontario, Farwell v. Citair, Inc. (General Coach Canada), 2014 ONCA 177, the answer is unclear. What is clear, however, is that in order for an employer to avail itself of the argument that an employee has failed to mitigate his damages by returning to work for the dismissing employer, (see: Evans v. Teamsters Local Union No. 31, 2008 SCC 20 (CanLII), [2008] 1 SCR 661,) the employer must offer the alternate position to the dismissed employee after termination, not before.

How Long Does an Employee Have to Sue for Unpaid Commission Payments?

How Long Does an Employee Have to Sue for Unpaid Commission Payments?

How long does an employee have to sue for unpaid commission payments in Ontario? Simple; two years. Two years from what date? That was the question that the Court of Appeal for Ontario was recently asked to resolve in the case of Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733 (CanLII).

Hard Times: Economic Downturn, Judicial Discretion and the Duty to Mitigate

A few weeks ago this blog afforded an opportunity to an individual looking for work in employment law to write a guest blog post. Perhaps not surprisingly, following that post I was contacted by others in a similar situation looking to be afforded a similar opportunity.

This blog and, more to the point, Sean Bawden, are humbled by the success of this blog and by the request from others to write guest posts for it. Having given the issue some thought, the blog will continue to post articles by those looking for work in the employment law field in Ontario - provided that the posts meet certain quality standards. Whether those posts move to a separate page is an issue that will have to be considered; for now, they will appear on the main page.

What follows, then, is a post written by Paul Willetts on the subject of the duty to mitigate in today's economy. Commentary by this blog will follow and any comments by this blog are added in square brackets.