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Employee did not condone temporary layoff by acknowledging it: Court

Pham v Qualified Metal Fabricators Ltd., 2023 ONCA 255 is a recent Ontario Court of Appeal decision that has important ramifications for employers, setting the bar quite high for employers to establish “condonation” by the employee in the face of a layoff.

Background

After almost 20 years of service, Binh Viet Pham was laid off on March 23, 2020. His employer, Qualified Metal Fabricators Ltd., told Pham they hoped he would be recalled in June 2020. He was also provided with a letter stating he was being placed on temporary layoff for a period of 13 weeks.

On June 2, 2020, Qualified Metal extended the layoff for a period of “up to 35 weeks.” The layoff period was extended two more times, once on Sept. 23, 2020, and again on Dec. 9, 2020.

Shortly after the second layoff extension in December 2020, Pham consulted and retained legal counsel. His lawyer advised Qualified Metal that Pham was going to file a lawsuit for wrongful dismissal. Qualified Metal responded on Dec. 24, 2020 stating that Pham had agreed to the layoff in writing.

On Jan. 25, 2021, Pham’s lawsuit was filed with the court, and he found a new job on Feb. 3, 2021.

On Feb. 9, 2021, Pham received a recall letter from Qualified Metal, to which he did not respond.

Qualified Metal then requested, and the court granted, a dismissal of Pham’s lawsuit on the basis that he had condoned the layoff by waiting nine months from the initial layoff and until after a second extension of the layoff period before objecting to it.

Pham appealed the court decision dismissing his lawsuit.

The appeal court’s ruling

The Ontario Court of Appeal overturned the previous judge’s decision, allowing the appeal and remitting the wrongful dismissal action back to the Superior Court for trial.

The court determined that Pham had not condoned his lay off for the following reasons:

1. The signature on the June 2020 letter informing Pham of the initial layoff (presuming the signature was his) was merely an acknowledgement of receipt, not an agreement to the layoff.

2. There was no evidence Pham was aware of the ramifications of the layoff, his potential wrongful dismissal lawsuit, or his other legal rights, until shortly after the second extension of the layoff when he consulted and retained a lawyer.

3. Employees are entitled to a reasonable amount of time to assess their legal situation before taking a legal position, and Pham’s “wait and see” approach was a product of Qualified Metal’s representations regarding its intentions to recall him, as well as invoking the Infectious Disease Emergency Leave (IDEL) under the Employment Standards Act. In the face of the representations made by his employer and the invocation of IDEL, the time Pham required before he took his legal position was reasonable.

4. Importantly, “condonation in the face of a layoff is expressed by positive action.” Positive actions include express consent to the layoff or expressing willingness to work such that it would be reasonable for an employer to believe the employee has consented to the change in the terms of the employment relationship. As such, simply failing to object to the layoff and being silent on the issue does not constitute condonation.

5. Finally, employees are not obligated to inquire about when a recall might happen before filing a lawsuit.

Lessons for employers

This case has set a high bar that employers will have to meet to successfully argue that an employee has condoned a layoff.

Employees are entitled to a reasonable amount of time to assess their legal position, and silence during this time period is not condonation. As such, it is not enough to show the silence or inaction of the employee, instead, employers must prove condonation by showing that the employee engaged in a positive act of acceptance of the layoff or that the employee demonstrated a willingness to work to the extent that it was reasonable for the employer to believe the employee had condoned the changes to the employment relationship.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.