Contrary to popular belief, a temporary layoff usually constitutes a wrongful dismissal which requires an employer to pay the laid-off employee termination pay.
This general rule does not apply in all situations such as when your employment contract states that the employee can be temporarily laid off, or your organization has a history of temporarily laying off an employee, or temporary layoffs are customary in your industry.
If your organization decides to temporarily lay off an employee despite the potential legal liability, is the employee required to accept a recall?
This question was considered in a recent case.
The plaintiff was temporarily laid off after 23 years of service because his employer was not busy. About 3.5 weeks later, he was recalled to work on the same terms and conditions of employment because his employer secured a contract that required his skills. He refused to return to work.
The court considered whether the plaintiff had a duty to accept the recall as part of his duty to mitigate his damages by accepting an offer of comparable employment.
The legal test
The legal test in this situation is whether or not a reasonable person would accept the recall to work that the plaintiff was offered.
When considering this question the court indicated it would consider the following factors: is the salary offered the same; are working conditions substantially the same; is the work demeaning; are the personal relationships acrimonious; the history and nature of the employment; whether or not the employee has commenced litigation; and whether the offer of re-employment was made while the employee was still working for the employer or only after he or she had already left.
When considering these factors, the judge accepted the following statement from the Supreme Court of Canada: The critical element is that an employee “not [be] obliged to mitigate by working in an atmosphere of hostility, embarrassment or humiliation.”
When applying the test to the facts, the judge concluded: “I am of the view that a reasonably objective individual in his circumstances would not have concluded that returning to work would be too embarrassing, humiliating, and/or degrading. [The plaintiff] has given no evidence as to how or why he would be “humiliated, embarrassed or degraded.”
Lessons to be learned
- A temporary lay off can inadvertently trigger a wrongful dismissal, which can trigger significant termination pay obligations.
- One way to reduce an employer’s legal liability to pay termination pay in a temporary layoff situation is to include a clause in the organization’s employment contract which gives the employer the right to temporarily lay off an employee as the term is defined in Ontario’s Employment Standards Act.
- Another way to reduce an employer’s legal liability to pay termination pay in a temporary layoff situation is to recall the employee to work. To keep this option available it is very important to, among other things, maintain good relations with the employee before the temporary layoff. As mentioned above, a judge will unlikely consider it reasonable to expect an employee to be recalled into “an atmosphere of hostility, embarrassment or humiliation.”