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Courts Split on Temporary Layoffs of Non-Union Employees
Can employers temporarily lay off non-union employees? Or does such an
action trigger an employee's right to termination pay under the Employment
Standards Act or amount to wrongful dismissal under the common law? In two
recent separate decisions, the Ontario Divisional Court has considered
whether non-union employees may be temporarily laid off, and has arrived at
seemingly contradictory conclusions.
Stolze: Silent Contract Permits Temporary Layoff
Stolze v. Adjudicator Lisa Addario, a case decided on December 19, 1995,
involved a complaint under the Employment Standards Act by Otmar Stolze, a
middle management employee who had been temporarily laid off due to shortage
of work. His salary was discontinued, but some benefits were maintained.
Following the layoff, Stolze commenced an action for wrongful dismissal and
also claimed termination and severance pay under the ESA, arguing that the
layoff constituted a breach of his employment contract. The Employment
Standards Adjudicator decided against Stolze, ruling that the Act
contemplated temporary layoff without pay and that, in doing so, it drew no
distinctions between hourly-rated employees and salaried employees, such as
Stolze. The Adjudicator further found that, by treating the layoff as a
termination, Stolze had moved first to end the employment relationship,
thereby `quitting' and forfeiting his entitlement to severance and
termination pay. Stolze applied for judicial review.
The Divisional Court dismissed the application, upholding all of the
Adjudicator's rulings on the ESA. The Court also noted that the
Adjudicator's finding that Stolze had `quit' was reasonable because his
contract of employment did not expressly prohibit temporary layoffs without pay:
"It was not suggested that the contract of employment contained any express
prohibition of temporary lay-offs without pay. It was reasonable for the
adjudicator to make her finding that the employee "quit" on the footing that
there was no such prohibition."
However, the Court suggested, the result in the case might have been
different had there been an agreement between the parties to pay a
particular salary for a specific year, for each year indefinitely, or for a
fixed term.
Style: Silent Contract Prohibits Temporary Layoff
In Style v. Carlingview Airport Inn, decided on February 27, 1996, the
Divisional Court considered an appeal from a decision of the Small Claims
Court denying an employee's claim for wrongful dismissal damages. Laurel
Style, a chamber maid, alleged that she had been fired after being accused
of theft and subjected to racial slurs. The employer denied these
allegations, contending that Style had been temporarily laid off for lack of
work. One month after her release, Style was offered her job back, but was
unable to accept for medical reasons. However, she did not advise the
employer of those reasons. The lower court accepted the employer's account
of events, and held that Style had terminated her own employment when she
failed to return to work.
In granting Style's appeal, the Divisional Court focused on the fact that
nothing in the contract of employment authorized a temporary layoff.
Further, the Court added, there had been no layoffs before, nor had any
warning been given of a possible layoff. Because there was no term in the
contract permitting temporary layoffs, the Court held that the contract had
been breached and Style wrongfully dismissed:
"In my view there was no express or implied term of the contract of
employment that the employee could be temporarily laid off without pay. ...
I therefore conclude that [the employee] was wrongfully dismissed."
The Court distinguished the decision in the Stolze case by pointing out
that, in that case, the Court was dealing only with a claim under the ESA.
The ESA, the Style Court observed, sets up a separate statutory code for the
payment of termination pay, but does not affect common law rights and
obligations regarding dismissal. Therefore, the Court held, the Stolze
decision was not determinative of the issues in Style's wrongful dismissal case.
In Our View
While it is possible to explain the differing results in these cases as
being due to the fact that Stolze was decided under the ESA, and Style under
the common law, the key to their divergence appears to be the different
views taken of what is permissible under a contract that is silent about
temporary layoffs.
The apparent assumption of the Divisional Court in Stolze was that
temporary layoffs are permitted if the contract is silent, while that of the
Style Court was that such layoffs are prohibited if the contract is silent.
This contradiction underscores the importance for employers of including
language in their employment agreements reserving the right to implement
temporary layoffs in accordance with the ESA.
Leave to appeal the Stolze decision to the Court of Appeal has been
granted. (For more recent developments, see "Stolze temporary layoff ruling reversed" on our Publications page.)
For more information on this subject, please contact Andrew Tremayne (613) 563-7660, Extension 236.
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