Popescu v. Wittman Canada Inc.: Temporary Lay Off Constitutes Constructive Dismissal, Toronto Employment Lawyer

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Employment contracts cannot import lower standards than what are set out in the Employment Standards Act, 2000 (“ESA”), otherwise they are invalid. Employment contracts can either incorporate ESA minimum rights, or they can apply a greater standard. If a contract incorporates some ESA standards but is silent on others, does the ESA or common law govern?

In Popescu v. Wittman Canada Inc., (2017) ONSC 3252 the employment contract between the employee and employer contained a valid termination clause that limited the employee to ESA minimums with respect to payment in lieu of notice. However, the contract was silent about the right of the employer to impose a temporary lay-off, and any obligations it may have in the event of a lay-off.

In this case, the employer temporarily laid off Popescu. He considered himself constructively dismissed, and pursuant to his contract, he was entitled to 8 weeks’ salary in lieu of notice.

According to the ESA, a temporary lay-off does not constitute termination, unless it lasts longer than the permitted 35 weeks (in a 52-consecutive week period (s.56(1)(c)). It also provides that an employee who is constructively dismissed must resign within a reasonable period of time after the constructive dismissal (s.56(1)(b)). In this case, the employee did not resign. Both parties agreed that pursuant to the common law he was constructively dismissed, but the question remained whether the employment contract incorporated the ESA requirement regarding resignation.

The employer argued that: 1) the employee was not terminated as the lay-off was a temporary lay-off, and 2) the employee failed to resign within a reasonable period of time, therefore was not entitled to termination pay. The court disagreed.

The court held that the employment contract displaced s.56 of the ESA. While the ESA provides that a constructively dismissed employee is only a terminated employee if s/he resigns within a reasonable period of time after the constructive dismissal, the employment contract did not. In this regard, the requirements of the employment contract were more beneficial to the employee than the standards set out in the ESA.

The contract expressly imported the notice provisions of the ESA, but was silent with respect to termination provisions of the ESA. Because the contract did not require the employee to resign after being constructively dismissed, common law governed, and the employee was found to be terminated. Due to this, the court granted the employee the amount of payment in lieu he was entitled to under the contract.

The takeaway from this case is that if an employment contract is silent with respect to certain onerous provisions contained in the ESA, common law will govern.

If you are an employer or an employee who needs legal advice based on how the changes to the Ontario and Federal Laws affect you, make sure to contact Monkhouse Law.

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