COURT OF APPEAL FOR ONTARIO DATE: 20230413 DOCKET: C70662

Zarnett, Thorburn and Copeland JJ.A.

BETWEEN

Binh Viet Pham Plaintiff (Appellant)

and

Qualified Metal Fabricators Ltd. Defendant (Respondent)

Counsel: David Vaughan and Jonathan Pinkus, for the appellant Christine Ashton and Shaliney Malhotra, for the respondent

Heard: January 10, 2023

On appeal and cross-appeal from the judgment of Justice Grant Dow of the Superior Court of Justice, dated April 27, 2022.

Thorburn J.A.:

Overview

[1] The appellant, Binh Viet Pham brought a claim for wrongful dismissal, after receiving a notice of layoff followed by several extensions.

[2] The respondent, Qualified Metal Fabricators Ltd., brought a motion for summary judgment to dismiss the claim on the basis that the appellant had agreed to or condoned the layoffs or alternatively, failed to mitigate his damages by not seeking new employment. The appellant initially took the position that the matter could be decided by summary judgment and brought a cross-motion for an order that he had been constructively dismissed; by the time of the hearing, however, the appellant took the position that summary judgment was not appropriate and asked for judgment in his favour only in the alternative.

[3] The motion judge granted the respondent’s motion for summary judgment dismissing the claim for wrongful dismissal, and dismissed the appellant’s cross-motion for judgment.

[4] The appellant raises three grounds of appeal. He claims that the motion judge erred:

(i) by proceeding on the mistaken understanding that “both parties sought summary judgment” and in failing to assess whether summary judgment was appropriate;

(ii) in finding that there was an implied agreement to layoff the appellant because the appellant was aware that many of his co-employees had been laid off in the past; and

(iii) in deciding that the appellant condoned the layoffs (and therefore was not wrongfully dismissed) by (a) signing the letter provided to him when he was laid off; (b) seeking legal advice; and/or (c) not protesting his own layoff.

[5] The appellant submits that, although summary judgment ought not to have been granted dismissing his claim, this court should review and consider the issues of implied agreement to layoff and condonation, and the legal implications thereof, as the motion judge made legal errors in his analysis of that issue: Manthadi v. ASCO Manufacturing, 2020 ONCA 485, 63 C.C.E.L. (4th) 163.

[6] For the reasons that follow, I would allow the appeal and will consider the issues of implied agreement and condonation.

The evidence

[7] The appellant is a welder who began his employment with the respondent on October 16, 2000. When he was laid off, he was 51 years of age and had worked for the respondent for almost 20 years.

[8] The respondent manufactures metal structures through cutting, bending and assembling processes. Half of the respondent’s revenue is derived from aerospace and food services industries.

[9] The respondent suffered significant financial losses as a result of the global pandemic. As a result, in March 2020, the respondent laid off 31 of its 140 employees including 11 of its 18 welders. The appellant was one of those employees who was laid off.

[10] On March 23, 2020 the respondent’s plant manager met with the appellant and informed him of the layoff. This was the first time the appellant had ever been laid off by the respondent. The respondent says the manager explained to the appellant that the layoff was temporary and he hoped that the appellant would be recalled by June 19, 2020.

[11] At the meeting, the appellant was provided with a letter (“the Layoff Letter”), advising that he would be placed on temporary layoff during which time his benefits would continue. The letter entitled “Notification of Temporary Layoff” provides that, “I regret to inform you that (due to budgetary considerations and recent slowdown) it is necessary to put you on temporary layoff for a period of thirteen (13) weeks”. The Layoff Letter provides that the layoff was “in accordance with [the respondent’s] work agreement”. A signature is beside the appellant’s name though the appellant says he did not sign the letter. No work agreement was provided to the appellant at the time of layoff or in this proceeding.

[12] On June 2, 2020, the layoff was extended by the respondent for a period of “up to 35 weeks”. It was extended again on September 23, 2020, and again on December 9, 2020 until September 4, 2021.

[13] On September 23, 2020, the respondent provided the appellant with a letter advising him that the layoff was subject to Ontario Regulation 228/20 under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”). The regulation provides that an employee whose hours of work were temporarily reduced or eliminated for reasons related to COVID-19 was retroactively deemed to be on Infectious Disease Emergency Leave (“IDEL”) rather than terminated.

[14] The appellant claims the respondent neither sought nor received his consent to the layoffs.

[15] In December 2020, the appellant consulted a lawyer. On December 22, 2020, the appellant’s counsel wrote to the respondent to advise that he was bringing a claim for wrongful dismissal.

[16] On December 24, 2020, the respondent replied, saying that the appellant signed a document agreeing to the layoff and that he hoped the appellant could be recalled in a few weeks.

[17] The Statement of Claim was issued under the simplified procedure in r. 76 of the Rules of Civil Procedure on January 25, 2021.

[18] The appellant secured alternative employment on February 3, 2021.

[19] On February 9, 2021, the appellant received a recall letter from the respondent. (The respondent claimed the supervisor called the appellant on February 1 but the appellant disputes this.) The appellant did not respond.

[20] The respondent brought a motion for summary judgment seeking dismissal of the action on the basis that the appellant condoned his layoff or, alternatively, failed to mitigate his damages by not seeking new employment. The appellant brought a cross-motion for summary judgment claiming wrongful dismissal effective March 20, 2020.

[21] However, in his factum filed shortly before the motion, the appellant advised that he was objecting to having these matters heard by way of summary judgment.

THE FIRST ISSUE: SHOULD THE APPELLANT’S CLAIM HAVE BEEN SUMMARILY DISMISSED

[22] Rule 20.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Regulation 194 (the “Rules”), provides that the court shall grant summary judgment where,

(i) the court is satisfied that there is no genuine issue requiring a trial of a claim or defence; or

(ii) the parties agree to have all, or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment.

[23] Although the appellant initially agreed to proceed by way of summary judgment, in his factum on the summary judgment motion, the appellant’s counsel took the position that he would no longer consent to proceed by way of summary judgment. He claimed he had not had the opportunity to cross-examine the respondent’s representative, examinations for discovery had not yet taken place, and the appellant sought to adduce further evidence on issues relating to condonation to support his assertions that:

(i) the appellant was not told layoffs were terms of his employment;

(ii) the signature on the Layoff Letter is not the appellant’s and in any event, the Letter does not constitute consent to the layoffs; and

(iii) the appellant did not know he was about to be recalled when he commenced his action for wrongful dismissal.

[24] However, the motion judge operated on the mistaken understanding that both parties agreed to proceed by way of motion for summary judgment. Because of this mistaken assumption, the motion judge did not determine whether it would be fair and just to proceed in summary fashion. Nor did he acknowledge that the appropriateness of summary judgment was in dispute. The failure to engage with a party’s position is an error in principle: Singh v. Concept Plastics Limited, 2016 ONCA 815, at para. 24.

[25] The appellant’s claim should not have been summarily dismissed over the appellant’s objection to proceed by summary judgment, without addressing the appropriateness of proceeding by way of summary judgment, and in circumstances where it was not clear that the appellant’s claim did not raise a genuine issue requiring a trial. For these reasons, I would allow the appeal of the order for summary judgment dismissing the claim.

[26] I further find that a discussion of the applicable legal framework on the issue of constructive dismissal (including the presence of an implied term permitting layoffs and the issue of condonation of the layoff) is necessary as the decision was based on an incorrect view of the applicable law. In Manthadi at paragraph 29, Juriansz J.A. for this court held that,

[T]he motion judge erred in concluding that summary judgment was appropriate. As summary judgment was not appropriate, the remaining questions are issues for trial. However, they are related to the first question because the motion judge’s conclusion that summary judgment was appropriate rested on an incorrect view of the applicable law on when and how much recognition should be given to an employee’s service with the predecessor employer. Consequently, a discussion of the applicable legal framework is necessary.

[27] Section 134 of the Courts of Justice Act, R.S.O. 1990, c. C.43 provides that a court of appeal may” make any order or decision that ought to or could have been made by the court or tribunal appealed from.

THE SECOND ISSUE: CONSIDERATION OF IMPLIED TERMS PERMITTING LAYOFFS

1. General Principles of Constructive Dismissal and the Presence of an Implied Term Permitting Layoffs

[28] Constructive dismissal can be established by either (i) the employer's breach of an essential term of the employment contract, or (ii) a course of conduct by the employer that establishes that it no longer intends to be bound by the employment contract: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, [2015] 1 S.C.R. 500, at paras. 37-43.

[29] Absent an express or implied term in an employment agreement to the contrary, a unilateral layoff by an employer is a substantial change in the employee’s employment contract that constitutes constructive dismissal: Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, at para. 14. This is so, even where the layoff is temporary: Stolze v. Addario (1997), 36 O.R. (3d) 323, 35 C.C.E.L. (2d) 109 (C.A.).

[30] In such cases, an employee has an immediate right to pursue a claim for constructive dismissal: Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, 71 C.C.E.L. (4th) 57, at para. 55.

[31] Where the employment contract has no express term concerning lay offs, a right that an employer may do so will not be readily implied. The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee. “The right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”: Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.

[32] Sections 56(1)(c) and 56(2) of the ESA give an employee who has been laid off, 35 weeks to “wait and see” if they will be recalled before electing termination and/or severing the employment relationship by pursuing a claim for constructive dismissal. A layoff exceeding 35 weeks is a deemed termination of employment: Elsegood, at paras. 16-24. The statutory 35-week temporary layoff period under ss. 56(1)(c) and 56(2) is a “minimum standard”: Elsegood, para. 21.

[33] The ESA does not displace greater contractual or common law rights and protections: Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, [1992] S.C.J. No. 41, at para. 25; Miranda v. Respiratory Services Limited, 2022 ONSC 6094, at para. 60, citing ESA, ss. 5(2) and 8(1). The fact that a layoff was conducted in accordance with the ESA “is irrelevant to the question of whether it is a constructive dismissal”: Bevilacqua v. Gracious Living Corporation, 2016 ONSC 4127, at para. 9.

[34] In response to the COVID pandemic, Ontario enacted Regulation 228/20 which created a new category of leave under the ESA called the IDEL. Regulation 228/20 sets out when an employee is deemed to be on IDEL (s. 4); and when an employee, whose hours of work are temporarily reduced or eliminated by the employer, for reasons related to the COVID-19 pandemic, is not considered to be laid off (s. 6) or constructively dismissed (s. 7). Sections 5, 6 and 7 exempt an employee from the application of IDEL whose employment was terminated on or after March 1, 2020, or who was constructively dismissed or laid off for longer than the temporary lay-off period before May 29, 2020. Finally, s. 8 prohibits employees from bringing any complaint during the designated pandemic period.

[35] The respondent relied upon Regulation 228/20 to justify the appellant’s layoff. However, at the summary judgment motion, the respondent advised that it would no longer be relying upon the regulation and would, instead, rely exclusively upon the argument of condonation/acquiescence. As such, it is not necessary to consider the effect of Regulation 228/20.

2. Was There an Implied Term Permitting Layoffs?

[36] The appellant’s terms of employment do not expressly permit the respondent to lay him off. The question before the motion judge was whether there was an implied term permitting the respondent to lay the appellant off.

[37] The respondent argued on appeal, as it did on the motion below, that it had an implied right to lay off the appellant due to its past practice of laying off employees in 2009. The respondent further claims that by September 2020, most of the respondent’s welders had been recalled and the appellant was therefore “undoubtedly aware” that he would soon be recalled.

[38] The motion judge did not consider whether there was an implied term allowing him to be placed on a temporary layoff. The failure to consider this is a reversible error of law warranting appellate intervention: see Kurt v. Idera Inc., 2016 ONSC 3799, at para. 23 (Div. Ct.).

[39] Moreover, as noted above, the fact that other employees were laid off does not constitute an implied term of the appellant’s contract of employment permitting his layoff.

[40] The respondent relies on Hefkey v. Blanchfield, 2020 ONSC 2438, 62 C.C.E.L. (4th) 223, at paras. 46-50, for the proposition that an employer may rely on past layoff practices to establish an agreement allowing the employee to be temporarily laid off. I do not agree with such a broad assertion.

[41] First, on the record before the motion judge, the factual circumstances in Hefkey are distinguishable from this case. In Hefkey, the trial judge found that the plaintiff had not been constructively dismissed after considering the unique circumstances of the case, including the “nature of the industry, the size of the company and the layoff practices for other employees”: Hefkey, at para. 46. The considerations in Hefkey included the fact that this was a small family business that slowed down each winter; by contrast, the respondent in this case has 140 employees and operated throughout the year.

[42] Second, Hefkey is premised on the unsound legal foundation that the employee “has the onus of establishing that his employment contract did not include a layoff provision”: Hefkey, at para. 50. This is irreconcilable with this court’s decision in Elsegood, which states that the employer has the onus to demonstrate that layoffs were permitted. Otherwise, “[a]t common law, an employer has no right to lay off an employee”: Elsegood, at para. 14.

[43] Accordingly, the fact that the respondent previously laid off some of the appellant’s co-workers does not justify the result the motion judge reached as it does not constitute an implied term in the appellant’s contract to lay him off.

THE THIRD ISSUE: CONDONATION OF LAYOFF(S)

1. The Legal Principles Regarding Condonation of Layoffs

[44] As noted above, when an employer without prior agreement lays off an employee, the employee may elect to wait and see if later he will be able to return to his previous job. Or the employee may treat the lay-off as a wrongful dismissal: Martellacci v. CFC/INX Ltd. (1997), 10 C.P.C. (4th) 143, 28 C.C.E.L. (2d) 75, at paras. 33-35 (Ont. Gen. Div.); see also, generally, Elsegood.

[45] An employer’s conduct that would otherwise support a finding of constructive dismissal may however be condoned by the employee, such that the employee cannot claim to have been constructively dismissed. Condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”: Greaves v. Ontario Municipal Employees Retirement Board (1995), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.).

[46] Condonation is a defence to a claim of constructive dismissal and the burden is on the employer to establish it: McGuinty v. 1845035 Ontario Inc., 2020 ONCA 816, 154 O.R. (3d) 451, at para. 24. In McGuinty, Huscroft J.A. for this court held at para. 31 that,

[W]hile it may be reasonable to find that an employer's burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer's impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal.

2. Whether the Appellant Condoned his Layoff

[47] On the record before him, the motion judge was not entitled to find there was no genuine issue requiring a trial such that the claim for wrongful dismissal should be dismissed because, on the record before him, condonation was not established.

[48] First, assuming the signature in the Layoff Letter is the appellant’s, the letter does not constitute condonation of the layoff as there is no evidence the signature was anything more than an acknowledgment of receipt of the terms set by the respondent for the layoff.

[49] Second, although the appellant contacted a lawyer in December 2020 (not March 2020 as set out in the reasons), this was long after the layoff began, after the layoff had been extended several times, and days before he asserted his claim for constructive dismissal. As such, 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.

[50] Third, the evidence does not permit the conclusion that the appellant’s failure to object to the layoff when he was not permitted to work for the respondent constituted condonation.

[51] Determining whether an employee has objected to a fundamental change in the agreement within a reasonable period is a fact-specific determination based on the consideration of a number of factors, and the motion judge’s findings in this regard are entitled to deference: McGuinty, at para. 25. However, in considering the effect of the appellant’s silence in the face of these layoffs, the motion judge made three extricable legal errors.

[52] First, he failed to consider that an employee is permitted reasonable time to assess contractual changes before they are forced to take an irrevocable legal position: Belton v. Liberty Insurance Co. of Canada (2004), 72 O.R. (3d) 81, 34 C.C.E.L. (3d) 203, at para. 26 (C.A.). In Belton, Juriansz J.A. held at para. 26 that:

The vulnerability of employees who believe they may have been constructively dismissed and the difficulty of making the life-altering decisions they face must be recognized. In this context, it is understandable that such employees may wish to try to adjust to the new terms and conditions without affirming the employer's right to make these changes and before taking the radical step of advancing a constructive dismissal claim. Allowing employees reasonable time to assess the new terms before they are forced to take an irrevocable legal position not only addresses their vulnerability, but also promotes stability and harmonious relations in the workplace. For these reasons, I am of the view that the appellants had no obligation to acknowledge [the employer’s] right to change the compensation schedule, and that their failure to do so did not constitute a repudiation of their agreement…

See also: Martellacci, at paras. 33-35; Andrews v. Allnorth Consultants Ltd., 2021 BCSC 1246, at paras. 47-50.

[53] Each of the layoff notices was renewed within the 35-week period set out in the ESA. In the September 23rd letter, the employer advised that the layoff was subject to Regulation 228/20 in view of the COVID pandemic. The evidence was consistent with the appellant’s wait and see approach which in turn, was the product of the respondent’s representations regarding (i) it’s intentions to recall him, and (ii) it’s invocation of the IDEL. In these circumstances, the motion judge erred in failing to consider that there was a genuine issue as to whether the appellant took a reasonable time to assess his situation before advancing a constructive dismissal claim: Belton, at para. 26.

[54] Although the motion judge was alive to the concern of reasonable time, he erred in equating silence during these reasonable periods, with condonation.

[55] Second, condonation in the face of a layoff is expressed by positive action. Positive action includes expressed consent to the layoff or expressing a willingness to work before claiming wrongful dismissal such that the employer would reasonably believe that the employee consented to the change in the terms of employment: see, for example, the indicia of condonation present in Muntean v. Enablence Canada Inc., 2016 ONSC 923, at paras. 10-13. There is no such evidence here.

[56] Third, the motion judge distinguished McGuinty, on the basis that in that case, while the employee took no steps to pursue his wrongful dismissal claim for over a year, the employee was on medical leave for stress and unable to condone the changes to his employment; the motion judge held that in this case by contrast, the appellant was not medically incapacitated. However, in my view, the principle in McGuinty stems not only from Mr. McGuinty’s stress, but from the fact that he was unable to condone changes to his employment because he was not actively working during the period, much like the appellant in the present case.

[57] Moreover, there is no requirement for an employee to ask when they might be called back to work before commencing an action for constructive dismissal: Coutinho, at paras. 54-55.

[58] As such, there is no evidence capable of supporting the motion judge’s conclusion that the wrongful dismissal action should be dismissed. On the contrary, on the evidence before us, there is a live issue as to whether there was condonation.

Conclusion

[59] In sum, there is a genuine issue requiring a trial that the respondent breached the terms of the appellant’s employment by laying him off involuntarily, and thus, that he was constructively dismissed.

[60] For the above reasons I would:

(i) allow the appeal and set aside the order for summary judgment dismissing the claim for wrongful dismissal; and

(ii) remit the action for wrongful dismissal back to the Superior Court for trial.

[61] On the agreement of both parties, I would award costs of this appeal to the appellant in the amount of $13,500.

Released: April 13, 2023. “BZ”

“J.A. Thorburn J.A.”

“I agree. B. Zarnett J.A.”

“I agree. J. Copeland J.A.”