When going about the decision to lay-off an employee, it
is important that you are aware of your rights to ensure the
lay-off is valid and cannot be determined to be a termination by
the courts. Ontario courts have consistently found that an employer
cannot lay-off an employee unless there is an explicit or implied
term in the employment contract permitting the lay-off –
despite the existence of lay-off provisions in the Employment
Standards Act, 2000 ("ESA").
So what does this mean for employers in
If a contract has an explicit term permitting lay-off then
you do not need to worry – you can validly lay-off the
If there is no explicit term permitting lay-off, you will
have to prove that the term was implicit if you want to proceed
with the lay-off. Examples of cases in which a term
permitting lay-off was implied includeGreene v.
Chrysler Canada Ltd. (1982), 7 C.C.E.L. 166 (B.C. S.C.);
affirmed (1983), 7 C.C.E.L. 166 (B.C. C.A.) and MacKenzie v.
Atlantic Neon & Plastic Signs Ltd. (1986), 14 C.C.E.L. 52
(N.B. Q.B.). In Greene, the employee was advised that
recall would be possible if a position became available, and the
employee was aware or should have been aware of the possibility of
lay-off due to the economic difficulties of the employer. The
benefits handbook in Greene also referred to benefits
coverage during lay-off. In MacKenzie, the employer
demonstrated that all employees were laid off due to economic
circumstances, and the employee had been told that he would be
recalled as soon as work was available. The employer had, in
previous years, laid employees off seasonally.
If there is no evidence of economic difficulties or
seasonal lay-offs, it is unlikely that a court will find an implied
term permitting lay-off. In the case of Youkhanna v.
Spina's Steel Workers Co. (2001),  O.J. No. 4279, 15
C.C.E.L. (3d) 99, 2001 CarswellOnt 3915 , MacFarland J. (Ont.
S.C.J.), the Court found that there was not an implicit term
because the employer produced no records to demonstrate that
business was falling off, produced no evidence to demonstrate
seasonal layoffs, or that others were laid off at same time as the
employee, and the employer was not able to demonstrate any economic
reason for the employee's lay-off.
There may be a very slight possibility to argue that the
ESA does not require either an express or implied contractual term
to permit a valid lay-off based on the court's decision in
Trites v Renin Corp. (2013) CarswellOnt 5634 ON SC, where
the court stated that "there is no room remaining at law for a
common law claim for a finding of constructive dismissal in
circumstances where a temporary layoff has been rolled out in
accordance with the terms of the ESA". However, given the
large number of cases decided against that, this argument is not
likely to succeed.
How can you ensure that you have a right to
The best way to ensure that you will be able to lay-off
your employees is to enter into a written employment agreement with
your employees that explicitly provides for a right to
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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