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Another Judge Finds that COVID-related Layoff is Constructive Dismissal

Blog | Constructive Dismissal | COVID-19

We have said it many times before: temporary layoffs are constructive dismissals in almost every (non-unionized) situation. And as far back as March 24, 2020, I warned that the COVID-19 pandemic did not change that.

It has taken a few years for these cases to make their way through the court system:

  1. first, people waited to see what would happen and if they would be reinstated,
  2. then there was often negotiation with threats of litigation, and then, as we know,
  3. our already backlogged courts are even more backlogged now.

Although it has taken time, our warnings are being borne out. In the latest case, a former Vice-President at Airways Transit was awarded 25 months of pay in lieu of notice plus an additional $30k for the manner in which he was treated; see Chalmers v. Airways Transit Service Ltd. and Badder Capital Group Ltd.

Notably, that case involved the travel industry, which was completely shut down due to the pandemic. If there was a compelling scenario for the argument that employers should not be penalized for trying to reduce costs during an unprecedented global pandemic, this was a pretty good one. However, the court did not buy that argument, and it also rejected the notion that changes to the Employment Standards Act, 2000 in Ontario, which made COVID-related layoffs immune from statutory constructive dismissal claims, impacted the common law:

The fact that a layoff may be conducted in accordance with the ESA is irrelevant to the question of whether it is a constructive dismissal at common law: see Bevilacqua v. Gracious Living Corporation, 2016 ONSC 4127 (Ont. S.C.J.), at para. 9. At common law, an employer has no right to layoff an employee. Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment and would be considered a constructive dismissal: see Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, at para. 14; McLean v The Raywal Limited Partnership, 2011 ONSC 7330, at para. 19; and Bevilacqua, at para. 9.

Punitive Damages

The Court noted that:

  1. When initially laid off, Mr. Chalmers was asked to work without pay.
  2. In or about June 2020, Airways Transit had recalled several senior managers but not Mr. Chalmers.
  3. Airways Transit contacted Mr. Chalmers in the months subsequent to his layoff to ask questions regarding operations, procedures, contacts and staffing matters. He was also asked to provide passwords. I find that this conduct was an obvious attempt by Airways Transit to phase Mr. Chalmers out of his role as Vice-President.
  4. Mr. Chalmers followed up with Airways Transit multiple times about returning to work and Airways Transit failed to respond to his inquiries.
  5. Airways Transit refused to pay Mr. Chalmers his outstanding vacation pay in contravention of the ESA.
  6. Airways Transit failed to make contribution to Mr. Chalmers’ RRSP plan.
  7. As of the motion hearing date, Airways Transit had not paid Mr. Chalmers his statutory entitlements pursuant to the ESA.
  8. Despite attempts by Mr. Chalmers to return Airways Transit’s property, Airways Transit pled that he had failed to return said property and threatened “recovery” of damages for same.
  9.  Transit’s conduct, including its silence and failure to provide relevant information in a timely manner, severely harmed Mr. Chalmers’ ability to make informed decisions concerning his employment and career.
  10. By its actions, Airways Transit also failed to assist Mr. Chalmers with a new job search or to give him a letter of reference.

As a result, the Court agreed that “ Airways Transit did not satisfy its duty of good faith in its dealing with Mr. Chalmers and recalling him to work” and that this fact justified an award of punitive damages in the amount of $30,000.

Pith and Substance

Although there was much debate about whether a COVID-related layoff was a constructive dismissal back in 2020, this decision and others like it should not come as a surprise. As the court confirmed,

Absent an agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment and would be considered a constructive dismissal.

There are many similar cases making their way through the legal system, and the decisions to date do not favour employers.

While we certainly hope there will be no more pandemic-related layoffs, we do work with our employer clients to include temporary layoff clauses in their contracts. When present, such clauses allow employers to implement temporary layoffs to reduce costs, and without fear or liability, even in the absence of a pandemic.

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