The Ontario Court of Appeal reviewed a trial decision where an employee claimed constructive dismissal and the employer argued the employee had been subject to a temporary Lay-off. In Taylor v. Salytics Inc., 2026 ONCA 621 the appeal focused on the clause permitting the temporarily lay-off of Salytics’ employees, which the trial court found to be valid.
This is not an Alberta decision. However, it hails from the Ontario Court of Appeal so it likely has persuasive weight in Alberta employment law as well.
Facts
- Salytics is a technology company.
- Salytics’ employment agreement included a clause permitting temporary lay-offs, consistent with the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”)
- Facing financial difficulties, Salytics reduces the employee’s hours and pay under a written reduced-hours agreement.
- Salytics then placed the employee on a temporary lay-off, during which time benefits continued but no income was paid.
- Taylor returned to full-time work after receiving a recall notice, but pursued a declaration of constructive dismissal and damages for such.
- Taylor argued that any lay-off clause is automatically a termination clause under the ESA.
- Taylor further argued that on the facts of this case, construing the words of the employment agreement and where they are located in the agreement’s structure, are properly construed as a termination clause that breaches the ESA.
- Salytics’s position was that the temporary lay-off clause was not a termination clause for ESA purposes, despite conceding the contract’s “for cause” clause was invalid.
- The Ontario Superior Court of Justice 2025 ONSC 3461 determined the employee:
- Was not constructively dismissed; and
- The temporary lay-off clause was not an unenforceable termination clause under the Employment Standards Act, 2000, S.O. 2000, c. 41
- The Appellant (Employee) argued that the trial judge erred:
-
- In not concluding that any lay-off clause was automatically a termination clause under the ESA, or this contract’s clause was a termination clause breaching the ESA.
Analysis / Conclusion
The court acknowledged that a temporary lay-off is a constructive dismissal at common law.
However, a layoff is not constructive dismissal if it is properly permitted by the employment contract.
The court examined the plain language of the ESA finding that a temporary lay-off only operated as a termination of employment:
[31] … if it exceeds the length of a temporary lay-off, which is defined in s. 56(2). Section 56(4) further clarifies that an employee is not terminated even if they are laid off without a specified date of recall so long as the lay-off period does not exceed that of a temporary lay-off. Therefore, a temporary lay-off is not included in the definition of termination.
The temporary lay-off provision in the employment agreement noted that temporary layoff “…may be implemented in accordance with the requirements of the Employment Standards Act…”. That lay-off provision was situated just below the termination clauses.
The Court found that the lay-off clause was not a termination clause despite being situated just below the termination clauses. It was therefore not possible to use the problematic termination clauses to taint the layoff provision.
My Take
In the last few weeks, the Ontario Court of Appeal has been busy arming the profession with restated case law for foundational aspects of employment law. Constructive dismissal and temporary lay-off provisions are important aspects of the employment relationship, requiring nuanced approaches by both parties and their counsel.
We recently saw an employer failed to support their frustration claim, that they had based partially upon financial pressures. In this case, the courts recognize the financial realities facing an employer, provided that the employment contract provides for a clear, well-drafted temporary lay-off provision.
Taken together with Hill v. B&B Towing we now have further guidance of where the line between constructive dismissal, corporate restructuring, and temporary lay-offs might sit, in Ontario at least. For employer side counsel there is a strong reminder that temporary lay-offs could assist in navigating a financial hardship, if managed correctly.
Applied to the Alberta context, an employer should be mindful of the provisions of s.62(1) of the Employment Standards Code to ensure that the notice provided is legal and enforceable. The relevant statute in Ontario provides for additional detail in terms of duration of a temporary lay-off, and other terms balancing the employer’s and employee’s rights and responsibilities, so this is not directly applicable in Alberta.
Bow River Law provides these regular legal blog articles for the purposes of legal news, 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.
This article was first published on Bow River Law’s employment law blog.
