Employee "termination" under employment statutes will end employment for all purposes 

publication 

February 2012

Employment and Labour Bulletin

A recent decision from the Ontario Court of Appeal1, has confirmed that employees who are entitled to termination pay under the Ontario Employment Standards Act, 20002 (the "ESA"), will also be able to claim damages for wrongful dismissal under common law.

Brian Elsegood worked as a technician for approximately seven years until he was laid off in April 2009. Since his employer Cambridge Spring Service continued to pay the employer portion of benefits, the company was able to treat his period off work as a "temporary layoff", which meant that his statutory entitlements upon termination did not need to be paid out immediately. By January 2010, Elsegood had exceeded the "35 weeks within a 52-week period" threshold so his rights to statutory termination pay under the ESA crystallized.

Elsegood was paid the statutory amounts unconditionally, but the employer then took the position that no other amounts were owing. This resulted in a civil claim for wrongful dismissal damages. The employer proceeded with the rather novel argument that Elsegood's termination was only for statutory purposes, and his entitlement under the ESA was all that was owed. The Ontario Court of Appeal refused to overturn the decisions of the trial judge and the Divisional Court, both of which held that there was a valid common law claim for termination damages.

The employer unsuccessfully argued that the ESA and common law regimes are independent. The Court rejected this view and held that an employee's employment status simply cannot survive the termination of that status through a valid enactment of the legislature. The Court held that every employee should be able, in virtually every case, to claim constructive dismissal at common law if they are laid off for a period which exceeds 35 weeks in a 52-week period.

In dismissing the employer's attempt to argue for a prolonged indefinite layoff, the Court noted that the employer could not identify the date when this supposedly indefinite layoff would become a termination. Put differently, it is inconceivable for an employee to be "in limbo" perpetually.

The Court's decision in Elsegood confirms that while the ESA sets out the minimum requirements for various standards, these do not supplant the common law amounts which are payable on termination. And with respect to the timing for when claims arise, once an employee is terminated under the applicable statutory regime, the right to claim common law damages is triggered. As an interesting point to note, the Court of Appeal confirmed that this analysis would apply even in circumstances where an employment agreement contained an applied term allowing the employer to lay off the employee.

The Elsegood decision provides some helpful guidance to employers who are contemplating employee layoffs. Even in cases where the employee may well hold out hope for the economic circumstances to reverse and employment prospects with that employer to re-emerge, there are now virtually no circumstances where Ontario employees can be laid off for a period which exceeds the 35 in 52-week threshold and not have a right to claim damages.

by George Waggott

1 Elsegood v Cambridge Spring Service (2001) Ltd, 2011 ONCA 831.

2 SO 2000, c 41.

a cautionary note

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2012