Employee did not acquiesce to layoff by seeking legal advice and waiting to act: Court of Appeal

The Ontario Court of Appeal has found that a laid-off employee was constructively dismissed, rejecting the employer’s argument that failing to object to the layoff and obtaining legal advice amounted to consent to the change in employment terms.

In the layoff cases that arose during the COVID-19 pandemic, employers almost invariably argued that if the employee waited too long, they could not demonstrate constructive dismissal, says Jonathan Pinkus, an employment lawyer and partner at Samfiru Tumarkin.

“This case effectively removes that defence,” he says. “The employer cannot say that an employee waited too long and that, in and of itself, is dispositive of the claim.”

Pinkus and Samfiru Tumarkin colleague David Vaughan acted for the employee Binh Viet Pham in Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255.

Pham brought a claim for wrongful dismissal after being laid off for a repeatedly extended period. His employer, Qualified Metal Fabricators Ltd., brought a summary-judgment motion to dismiss the claim and argued that Pham had agreed to or condoned the layoff.

Pham initially brought a cross-motion, asking for a finding that he had been constructively dismissed. He then decided not to consent to proceed via summary judgment and included that information in his factum.

But the motion judge went ahead as if both parties had consented, granted Qualified Metal’s motion, and dismissed Pham’s claim for wrongful dismissal. The Court of Appeal’s panel, Justices Benjamin Zarnett, Julie Thorburn and Jill Copeland, found this was an error in principle. Assuming Pham had agreed, the judge did not determine whether proceeding in summary fashion would be “fair and just” in the circumstances. The judge also failed to acknowledge the dispute over the appropriateness of that route and that it was unclear whether Pham’s case raised a “genuine issue requiring a trial,” said Justice Thorburn, who wrote the reasons.

While the summary judgment issue was enough to allow the appeal, the court said a discussion on constructive dismissal’s applicable legal framework, including the issues of condonation and an implied term in the employment contract permitting layoffs, was also necessary.

A constructive dismissal occurs when either the employer has breached “an essential term” of the employment contract or has acted in a way that establishes they no longer intend to be bound by it. Thorburn said that unless there is an express or implied term in the contract that allows for one, a unilateral layoff amounts to constructive dismissal.

Qualified Metal argued in its motion and at the appeal court that because the company had laid off employees in 2009, Pham would have been aware of the practice and that this counted as an implied term. While it found that the motion judge did not consider whether there was an implied term – a reversible error warranting appellate intervention – the Court of Appeal said that past layoffs did not constitute one.

“They come to that decision by emphasizing that the right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation,” says Vaughan, national practice leader of Samfiru Tumarkin’s labour and employment law practice group. “That's the legal standard.”

The constructive-dismissal defence of condonation occurs when the employee’s conduct, when viewed objectively, would appear as if the employee were consenting to the change in employment terms.

Qualified Metals argued that Pham had not objected to the layoff and that his seeking legal advice meant he knew his rights and should have acted sooner. He had condoned the layoff in failing to do so, said the company.

On the first point, the court found that the layoff meant that Pham was not working and not present in the workplace, so he could not object to it. “Silence on its own or the lack of an objection cannot be deemed to be agreement or consent to the layoff itself,” says Vaughan.

Pham had contacted a lawyer months after the layoff began and after it had been extended several times, said Thorburn. “This is not evidence of knowledge of the ramifications of the layoff or consent to the layoff. Nor is it apparent that the respondent relied on the appellant having received legal advice in its decisions, as the respondent did not present evidence that it was even aware that the appellant received legal advice before December 22, 2020,” she said.

“The legal advice question… I think that's going to manifest itself in important ways in future claims,” says Pinkus. “Employers – I don't think are going to be in a position to ask whether the employee received legal advice in the context of a discovery, which employers love to do.”

Finding, contrary to the motion judge’s ruling, that there was a genuine issue requiring a trial and that Qualified Metals breached the employment agreement and constructively dismissed Pham, the Court of Appeal allowed the appeal, set aside the lower court’s ruling, and remitted the case to the Superior Court.