ABKB Gives Guidance on Layoff, Termination, Mitigation and Bias

By: Sarah Coderre

Published: 31 March 2023

In Northern Air Charter (PR) Inc v Dunbar, 2023 ABKB 171 (Woolley) (the “Dunbar Appeal”), the Alberta Court of King’s Bench provided some key guidance and insight into several issues that have not received recent judicial treatment in Alberta, including:

  • The distinction between a “layoff” and a termination;
  • The application of the common law to employees who are federally regulated and to whom the Canada Labour Code applies;
  • Whether rejecting an employer’s offer of re-employment constitutes a failure to mitigate damages; and
  • The legal test for judicial bias.

This case was an appeal from the Provincial Court of Alberta’s decision Dunbar v Northern Air, 2019 ABPC 179 where the Plaintiff Mr. Dunbar had been awarded 5 months’ reasonable notice.  The appeal was dismissed and Judge Hess’ decision in favor of Mr. Dunbar was upheld.  Legal counsel for Mr. Dunbar for both decisions was Bow River Law partner and employment lawyer Joel Fairbrother.


In the Dunbar Appeal, the parties did not dispute the key findings of fact made by Judge Hess at the Provincial Court of Alberta:

  • The plaintiff was a qualified pilot who began his employment with the defendant on June 16, 2014.
  • The plaintiff’s employment contract was vague as to whether it displaced his common law entitlement to reasonable notice.
  • The defendant’s employee handbook referenced the possibility of temporary layoffs, but those provisions were distinct from what was included in the plaintiff’s employment contract, and the handbook specifically stated it was not a contract.
  • On June 30, 2016, the plaintiff received a phone call from the defendant and was told he was being laid off. His keys and access cards were requested, he was locked out of the company website, and all future correspondence was to be via email.
  • The defendant then sent an email to the remaining staff and advised that the plaintiff was no longer employed with the company.
  • The defendant’s record of employment indicated pay in lieu of notice of $3,333 but he never received that money.
  • On July 19, 2016, the defendant issued an ROE which stated that the plaintiff’s employment had ended due to “shortage of work/end of contract or season”, and it stated the date of recall was unknown.
  • On July 21, 2016, the plaintiff took the position through his lawyer that he had been terminated.
  • On August 5, 2016, the defendant responded and stated that he had not been terminated but had been laid off.
  • On August 28, 2016, the plaintiff’s lawyer advised that if he had not been terminated, then the contract had been repudiated and the plaintiff accepted the repudiation.
  • On September 15, 2016, the defendant sent the plaintiff a recall letter. The plaintiff rejected the recall notice and advised that he intended to proceed via constructive dismissal action instead.
  • On September 20, 2016, counsel for the defendant advised the plaintiff’s counsel that the recall letter could be viewed as a recall or a job offer. The plaintiff rejected them.
  • The plaintiff filed his claim on September 23, 2016, and he found new employment in May 2017.

Provincial Court Trial Decision

This was the decision appealed from. 

At the Provincial Court trial before Judge Hess, the plaintiff argued that he was entitled to bring a claim for dismissal or constructive dismissal, that his employment had been dismissed or constructively dismissed, and that he had not failed to mitigate his damages by refusing to return to work with the defendant afterwards.  The plaintiff’s argument on constructive dismissal was that he had never agreed to accept a layoff in the terms of his employment contract.

The defendant argued that the plaintiff was barred from pursuing civil remedies under the common law and was required to instead pursue an unjust dismissal complaint before the Canada Industrial Relations Board because he was a federally regulated employee under the Canada Labour Code. The defendant also claimed that the language in the employee handbook had created an implied term of temporary layoff in the employment contract, and that the company had been within its legal right to layoff the plaintiff. The defendant further argued that the steps it took in laying off the plaintiff (i.e., requesting his keys and access cards, and removing his access to the company website) were reasonable because his return date was unknown, and that the plaintiff had acted unreasonably and failed to mitigate his damages when the recall notice had been sent to him and he refused to return.

Judge Hess concluded that the layoff provisions in the employee handbook could not be deemed to be incorporated into the contract and form contractual terms, specifically because the defendant had drafted the handbook to state that its terms were not contractual.

Judge Hess found that the plaintiff was entitled to pursue common law remedies if he wished, for two separate reasons:

  1. The employment was governed by the Employment Standards Code (Alberta) and not the Canada Labour Code because Mr. had not expressly agreed to be governed under the Canada Labour Code. Under the Employment Standards Code (Alberta) he had the right to pursue common law remedies if he wished. As such, Judge Hess concluded that the plaintiff had not acted improperly by filing his constructive dismissal claim; and
  2. Even if the Canada Labour Code did apply, the Canada Labour Code allows a plaintiff to pursue a civil remedy at common law.

Judge Hess found that the defendant’s purported layoff of the plaintiff constituted a termination of employment at common law because there is no automatic right of layoff under the common law, and a temporary layoff was not a contractual term the parties had agreed to.  Judge Hess also found it was not unreasonable for the plaintiff to refuse to return to work when “recalled” by the employer, and he awarded him damages equivalent to a 5 month notice period.

During the trial, Judge Hess made several comments regarding the defendant’s presentation of their defense and counterclaim, which had been focused on attempting to recoup travel credits and training costs associated with the plaintiff’s employment. The defendant abandoned its counterclaim without explanation during the trial.

King’s Bench Appeal

The defendant appealed Judge Hess’ decision to the Court of King’s Bench on a number of grounds:

  • That Judge Hess had erred in his interpretation of whether the plaintiff was governed under the Canada Labour Code or the Employment Standards Code;
  • That Judge Hess had erred in determining that there was no implied contractual term of temporary layoff based on the wording of the employee handbook, and that he erred in finding there was a constructive dismissal as a result;
  • That Judge Hess had erred in finding that the plaintiff had not failed to mitigate his damages by rejecting the recall offer; and
  • That Judge Hess had acted with bias towards the defendant throughout the trial, which made it impossible for the defendant to have a fair and impartial hearing.

Justice Woolley concluded that Judge Hess erred in determining that the Canada Labour Code only applied in employment situations where the parties specifically agreed to be governed by it. She clarified that the Canada Labour Code applies to all employees in federally regulated industries, such as air transportation, banking, telecommunications, marine matters, etc. She further clarified that the Canada Labour Code  provides an alternative form of relief, namely an unjust dismissal complaint, but it does not create the right for an employer to temporarily lay off an employee, and it does not preclude an employee from seeking common law remedies.

As such, although Justice Woolley concluded that Judge Hess had erred in determining the circumstances in which the Canada Labour Code applies, she agreed with his conclusion that the plaintiff was not prevented from seeking remedies under the common law (i.e., a claim for constructive dismissal), and that the fact that the Canada Labour Code applied as the minimum standards for the plaintiff’s employment did not make him eligible for a temporary layoff unless explicitly agreed to in his contract.

On the issue of the implied term of temporary layoff being read into the contract based on what the employee handbook stated, Justice Woolley found that Judge Hess had correctly interpreted the employment contract and the employee handbook when he concluded that there was no such implied term of temporary layoff, and in fact, quite the opposite given that the handbook explicitly stated it was not to be viewed as a contract.

In reviewing the facts and how the defendant had conducted the purported “layoff”, Justice Woolley found that it had all the hallmarks of a termination, and affirmed Judge Hess’ finding that the defendant had indeed terminated the Plaintiff when it ended his employment without warning, requested that he turn in his keys and access card, insisted that all future correspondence occur via email, and then emailed the remaining staff to advise that he no longer worked at the company.   

On the issue of the plaintiff’s alleged failure to mitigate his losses by not accepting the September 15, 2016 recall notice, Justice Woolley affirmed that Judge Hess had correctly stated the law as set out in the Supreme Court’s decision in Evans, and that he had applied the facts appropriately to the case at hand. She confirmed that whether an employee’s decision to refuse to return when offered re-employment constituted a failure to mitigate depended on the circumstances. She noted that by the time the “recall” notice was delivered, the plaintiff had been out of work for 2.5 months, and the defendant did not offer to pay him any back pay or make him whole, despite being fully aware that he was not employed elsewhere and had incurred legal expenses in dealing with them to date. She found that in these circumstances, if the plaintiff had returned to work he would have been required to give up his claim for compensation against the employer without any payment or he would have had to attempt to continue his claim while still being employed.

Finally, Justice Woolley considered whether Judge Hess had acted in a manner that had created a reasonable apprehension of bias, which would have cast doubt over the fairness of the trial and the decision rendered. She confirmed that while a judge is required to be impartial, they are not required to be neutral, and the fact that a judge may intervene at points during a trial is not on its own evidence of bias. Rather, she found there must be “cogent evidence” showing that the judge has done something to give rise to a reasonable apprehension of bias. The defendant claimed that Judge Hess had done just that when he expressed doubts about the legitimacy of its counterclaim as it was trying to enter evidence respecting the same. Justice Woolley found that because the defendant had abandoned its counterclaim without providing any evidence or information about its legal foundation or merits, it was impossible to determine whether Judge Hess’ comments that the counterclaim appeared to be deficient on its face could be used to impugn his impartiality. In concluding on the issue, Justice Woolley held that an allegation of a reasonable apprehension of bias must be raised with the trier of fact, so that they may have an opportunity to respond to the allegation and clarify their comments, adjust their comments going forward, or recuse themselves. No issue of bias was raised with Judge Hess, and Justice Woolley deemed it was inappropriate to raise it at the appeal hearing when he had not had an opportunity to explain, adjust, or recuse himself.

My Take

The Dunbar decision is an important decision for all Canadian employment law counsel, especially in Alberta. It highlights the importance of employers being precise with their language and actions when terminating an employee’s employment, because a court can conclude it is a termination of employment even if those words are not used.

Dunbar also highlights the importance of drafting employment contracts that are thorough and clearly outline the terms of employment that an employer wishes to rely on in the future. Additionally, the Dunbar decision also confirms that there is no implied right of layoff under the common law, and that in order for an employer to temporarily layoff an employee it must ensure that its ability to do so is agreed to in advance in the employment contract.

Further, the interaction between the Canada Labour Code and the common law for federally-regulated employees was clarified in Dunbar, as Justice Woolley confirmed that the Code does not remove any rights to remedies that an employee may have, or even provide an employer any additional rights or powers than what is found under the common law unless explicitly agreed to. Rather, the Code provides the employee with an alternate forum for remedy with the Canada Industrial Relations Board, where remedies such as reinstatement are possible.

Finally, Dunbar is also a critical case because it provides a recent application of the Evans test in Alberta. The surrounding circumstances must be considered when determining whether a rejected offer of re-employment constitutes a failure to mitigate.  

Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession.  These articles should be considered general information and not legal advice.  If you have a legal problem, you should speak to a lawyer directly.

Sarah Coderre is a partner and employment lawyer at Bow River Law.  Her main practice areas are human rights, employment law and labour law.