Wednesday, December 14, 2011

Layoffs in Non-Union Contexts

An unusual case came out from the Ontario Superior Court of Justice recently, McLean v. The Raywal Limited Partnership, where the core question, as the Court puts it, is "whether the plaintiff was laid off or dismissed".

This is strange, and rare, because the terminology of a "layoff" doesn't usually properly apply outside of union settings.  Yes, people will often use the term "layoff" to describe a dismissal due to reasons of business restructuring, thinking that "fired" or "dismissed" implies that there was misconduct, but that's not really a fair distinction where there are no unions.  People are fired for just cause, or not for cause.

At law, the best way of seeing the distinction between a layoff and a dismissal is that a layoff contemplates the recall of the employee.  And, in fact, the Employment Standards Act, 2000 has provisions dealing with temporary layoffs of limited durations, but that doesn't mean that they're available in every employment situation.  The employer needs to reserve the right in an employment contract.  As the judge put it in McLean, "In the absence of a contractual basis for layoff, the device of layoff does not exist at common law and any purported layoff will be, in fact, a dismissal."

In this case, in 1998 Natalie McLean was hired by Raywal.  Raywal had an employee handbook which included layoff provisions, but it was not integrated into her written offer of employment.  It was not referred to in the offer of employment, nor was she required to acknowledge in writing that it formed part of her contract.

I've talked about this before, usually in context of termination provisions:  Even if she received the handbook the day after accepting the offer of employment and read it and signed it, there would be a 'consideration' problem.  She wouldn't be contractually bound to it unless there's something of value passing in exchange for her agreeing to it.  (Other policies in an employee handbook are trickier - an employer has some rights to change the conditions of the work environment.  Hours of work, absenteeism and discipline policies, dress codes and decorum, use of office equipment...these are all things that the employer will be entitled to amend, within certain limits, unilaterally and on a regular basis.  The employee never really has a choice but to comply with these directions, and won't often be successful in arguing constructive dismissal on such bases.  But something permitting the employer to send the employee home without pay...that goes to the heart of the employment contract, and is not something that the employer will really be entitled to implement unilaterally.)

This case is a little more complicated than a simple consideration case, though, because McLean was laterally transferred to a different position in 2008, at which point she did sign a new contract which integrated the employee handbook.

In October 2010, McLean was told that she was being laid off, and given a recall date of June 27, 2011.  In late May, she was recalled, but she did not return to work.

So the question becomes whether or not the 2008 contract amendment was valid.  The judge found that there was no "obvious or certain improvement in compensation or terms of employment", and therefore no consideration.  (The employer argued that the provision of benefits through the layoff period was an improvement to her compensation package, but the judge understandably rejected that.  It would be a hard sell that saying "If we send you home temporarily, we'll leave your benefits in place" is a plus to somebody who is entitled not to be sent home.)

Therefore, McLean was dismissed and was entitled to pay in lieu of notice.  The judge found that no failure to mitigate was established, including by McLean not accepting an offer made on the eve of mediation in the litigation process, and awarded ten months' pay in lieu of notice.

My Thoughts

The decision largely makes sense to me, but I'm a little bit perplexed on the mitigation point.  It doesn't make clear when the litigation was commenced nor when, exactly, the offer on the eve of mediation was made, but while I can certainly understand the judge's reasoning dealing with the offer on the eve of mediation, I cannot understand how (or if) the judge dealt with the mitigation consequences of the original recall date or the notice of recall.

Given how the law of mitigation has developed, particularly after the Evans v. Teamsters case from the Supreme Court of Canada, failure to return following a recall notice, in most cases, would probably be considered a failure to mitigate.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

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