Layoff and Constructive Dismissal

Calgary Constructive Dismissal | Layoff & Dismissal Lawyers

COVID-19 has changed and continues to change, every Canadian’s life in one way or another.  Many businesses have been ordered to cease operations while others suffer from a drastic decrease in their revenues.  As such, there have been layoffs across the country, from small local businesses to multinational corporations. To reduce the impact on employers and employees, the government announced some temporary changes to the Alberta Employment Standards Code [the Code] amid COVID-19.  This article intends to highlight some of the changes with respect to layoff, and the position of Common Law on layoff.

Under the Code, an employer may temporarily lay off an employee by providing a written layoff notice advising that the employee is being temporarily laid off. The employer is also required to provide the employee with the effective date of the layoff, and reference sections 63 and 64 of the Code.  Typically, the employer must provide, at least, one week’s prior notice (if the employee has been working for less than 2 years) or two weeks’ prior notice (if the employee has been working for 2 years or more). However, in unforeseeable circumstances (such as the COVID-19 Pandemic), the employer may provide a shorter notice.

Under the Code, the temporary layoff, as the name suggests, must be temporary.  Generally, an employer cannot layoff its employee for more than 60 days within a 120-day period.  If a temporary layoff lasts longer than 60 days within 120-days period, the layoff is deemed to be a termination of employment, triggering termination obligations, and payments.  The exception to this rule is when the employer and the employee agree to payment of wages for an additional period of a layoff (and possibly benefits if the agreement provides so).

Now, in light of COVID-19, the Alberta government has announced that an employer can lay off its employee for up to 120 days. This is applicable to any layoffs that happened on or after March 17, 2020.  Does this mean an employer can lay off an employee for 120 days within 120-day period?  It shouldn’t be, as the government would not have intended allowing an indefinite layoff.  However, the government is yet to make an announcement as to the prescribed period.

During a temporary layoff, an employer may recall the employee to work with a written recall notice, and the employee must return to work within 7 days of this notice.  The employer may decide to terminate the employment relationship if the employee fails to return to work on time, without triggering termination obligations and payments.  As of today, the government has not made any changes to this provision.  However, under the Occupational Health and Safety Act, an employer has an obligation to take reasonable care to protect the health and safety of its employees.  As such, an employee may be able to refuse to return to work if he or she has a reason to believe that the workplace poses health risks.

As earlier stated, when an employer cannot recall all the employees within the prescribed time, without entering into an agreement for payment in lieu of an additional layoff period, the employment relationship is deemed to be terminated.  Ordinarily, if an employer intends to terminate the employment of 50 or more employees at a single location within a 4-week period, the employer must comply with the group termination provisions of under section 137 of the Code, including: giving a notice to the Minister before the date on which the first termination is to take effect, and giving a copy of the notice to the affected employees or their bargaining agent. However, the government has removed the requirement to provide a group termination notice to the affected employees or their agent, and the employer only has to give a notice to the Minister as soon as is practical.

Lastly, the government has added to the list a job-protected leave for employees caring for children or self-isolated family member due to COVID-19.  The current list of job-protected leave includes, among others, maternity and paternity leave, compassionate care leave, death or disappearance of child leave, bereavement, etc.

Generally, under the Code, no employer may lay off an employee who has started a job-protected leave.  However, the Code provides for an exception in a situation where an employer suspends or discontinues in whole or in part of the business (for instance, when the business stops due to COVID-19).  At the same time, under the Code, the employer is required to reinstate the employee or provide alternative work to the employee if the operation is resumed within 52 weeks following the end of the leave.  This has not been changed.

In light of the changes in the Employment Standards rules, the true implication of layoffs in Alberta is not as clear as it may be in other provinces, such as Ontario or British Columbia.

The current common law jurisprudence clearly states that there is no automatic or implied term of the employment contract that allows an employer to temporarily lay off its employee.  Thus, when such a layoff occurs, it will be deemed to be a wrongful dismissal. The real question then is how a provincial legislation that speaks to these layoffs would impact an employee’s common law rights.

In Ontario and British Columbia, courts have found, in favour of employees, that their respective legislations do not limit the employee’s common law right.  In other words, without an employment contract that expressly allows the employer to temporarily lay off the employee, the employee may bring a claim for constructive dismissal upon the receipt of layoff notice.

Unfortunately, as mentioned above, the law is not as clear in Alberta.  In Vrana v Procor Limited, 2003 ABQB 98, the Court found that section 62 of the Code had created a new right for employers in Alberta, which would suspend or delay the use of employee’s common law right until the occurrence of certain events mentioned in sections 63 or 64.

On the other hand, the Court in Turner v Uniglobe Custom Travel Ltd, 2005 ABQB 513, found that the employee’s common law right to treat layoff as a termination was preserved and that the employee was entitled to compensation for wrongful dismissal.

While Vrana was appealed to the Court of Appeal, the Court of Appeal did not directly address the effect of section 62 upon an employee’s common law right; instead, the Court of Appeal found that the appeal should be allowed on another issue relating to the layoff notice.

Even in other provinces where the courts have previously decided that the legislation does not impact employees’ common law right to pursue a constructive dismissal claim upon their layoffs, people are expressing concerns whether the courts should create an exception for employers given the current COVID-19 pandemic. Most business have had no choice to but to lay off their employees. In fact, some businesses have been mandated to shut down.

Alberta faces a greater level of uncertainty on this issue because there arises the question of how this unprecedented situation would influence the existing law, except that the impact of section 62 was never clear in Alberta, even prior to the COVID-19 outbreak.

Unfortunately, in the current state of emergency, it may be a while before we get a definitive answer for these questions.

Contact Osuji & Smith constructive dismissal lawyers in Calgary for questions related to your employment rights.

Written by Justin Kwon & Claire Lee

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