An Ontario employee who spent approximately 40 years working for the same employer was awarded $434,980 after the Ontario Superior Court of Justice found that he had been constructively dismissed.
The employee received no notice or termination pay when he was initially told he was being temporarily laid off. He continued performing some work without pay and was later offered the opportunity to return under significantly different conditions.
The court ultimately awarded the employee 24 months’ pay in lieu of reasonable notice, as well as compensation for an unpaid retirement allowance, unpaid wages, aggravated damages and punitive damages.
The decision in 2024 ONSC 3876 provides several important lessons for Ontario employees, particularly those with long service or informal employment arrangements.
Employee Laid Off After Approximately 40 Years of Service
The employee began working for the employer in 1978 and moved into full-time employment the following year. Over approximately four decades, he progressed from an hourly labourer to a salaried farm manager responsible for overseeing several farms and supervising other employees.
In January 2019, at age 58, the employee was told that he was being temporarily laid off. He received no advance notice or termination pay and was told that he could expect to return to work several months later.
During the layoff, however, the employee continued performing security and maintenance-related work for the employer without regular pay. He kept a diary recording 177 hours of work.
Several months later, the employer proposed that he return to work under different conditions, including an arrangement under which he would collect employment insurance while receiving additional compensation in cash. The proposed position would also remove assistance he had previously received with physically demanding work.
The employee refused the proposal.
The Court Found the Employee Was Constructively Dismissed
The court concluded that the employer’s actions amounted to constructive dismissal.
A temporary layoff can have significant legal consequences where the employment agreement does not give the employer the right to temporarily lay off the employee.
In this case, the court found that the initial layoff amounted to constructive dismissal. The later return-to-work proposal further demonstrated that the employment relationship would not continue on its previous terms.
Importantly, the employee’s continued performance of some duties during the layoff did not prevent the court from finding that a constructive dismissal had occurred.
Employee Awarded 24 Months’ Pay in Lieu of Notice
The employee sought 36 months’ pay in lieu of reasonable notice. The court did not accept that amount but concluded that 24 months was appropriate.
In reaching that decision, the court considered the employee’s approximately 40 years of service, his age at the time of termination, the nature of his employment and his prospects of finding comparable work.
The employee was awarded $109,980 for 24 months’ pay in lieu of notice.
The decision is an important reminder that there is no simple formula that determines how much notice or severance an employee may be entitled to receive. Length of service can be an important consideration, but it is not the only factor.
A Promise of a Retirement Allowance Was Enforced
Another significant part of the case involved a retirement benefit the employer had promised the employee years earlier.
The employee had raised concerns about not having a retirement benefit or financial safety net. According to the evidence accepted by the court, he was assured that he would be taken care of and would eventually receive an interest connected with one of the employer’s businesses.
The employee continued working for the employer and did not pursue other employment, relying on that promise.
The court found that the promise had become an implied term of the employment relationship and awarded the employee $250,000 for the unpaid retirement allowance.
For employees, this part of the decision illustrates why promises about future compensation, retirement benefits or other incentives to remain with an employer can be important even when the arrangement was not documented in a traditional written employment agreement.
The Employee’s Records Helped Establish Unpaid Wages
The employee had kept a diary recording the work he performed after being told he was laid off.
Those records showed 177 hours of uncompensated work. The court awarded him an additional $5,000 in unpaid wages.
For employees involved in an employment dispute, keeping records can be extremely important. Emails, text messages, employment agreements, pay records and personal records of hours worked may later help establish what occurred.
Aggravated and Punitive Damages Were Also Awarded
The court also considered the way the employee had been treated during and after his dismissal.
The employee gave evidence about the significant emotional and financial effects of losing his employment after approximately four decades of service. The court awarded $50,000 in aggravated damages for the harm caused by the manner of dismissal.
The court awarded a further $20,000 in punitive damages based on the employer’s conduct.
These damages were separate from the 24 months’ pay in lieu of notice and the retirement allowance.
Total Damages of $434,980
The employee’s award consisted of:
- $109,980 for 24 months’ pay in lieu of notice;
- $250,000 for the unpaid retirement allowance;
- $5,000 in unpaid wages;
- $50,000 in aggravated damages; and
- $20,000 in punitive damages.
The total award was $434,980.
Key Takeaways for Employees
This case provides several useful lessons for Ontario employees.
- A temporary layoff may amount to constructive dismissal. An employer calling a layoff “temporary” does not necessarily determine an employee’s legal rights.
- Long service can be an important factor in determining reasonable notice. In this case, the employee’s approximately 40 years of service, age, position and employment prospects contributed to an award of 24 months’ pay in lieu of notice.
- Promises made during employment may matter. The court enforced the retirement allowance that had been promised to the employee and awarded $250,000.
- Keep records of work you perform and promises made to you. The employee’s own records helped establish the 177 hours of unpaid work.
- The way an employee is treated during termination can matter. The employee received aggravated and punitive damages in addition to his wrongful dismissal damages.
What This Case Means for Long-Service Employees
Employees who have worked for the same employer for many years may assume that the amount offered when their employment ends is automatically what they are entitled to receive. This case demonstrates why the circumstances of the entire employment relationship can matter.
An employee’s length of service, age, position, prospects of finding comparable work, employment agreement and compensation arrangements can all be relevant. Long-standing promises concerning retirement or other compensation may also deserve closer examination.
Employees should also be cautious when an employer significantly changes the terms of employment, places them on a temporary layoff or asks them to return under substantially different conditions. Depending on the circumstances, these changes may raise questions about constructive dismissal.
If you have been dismissed after many years of service or your employer has significantly changed the terms of your employment, Toronto Employment Lawyer can help you understand your potential rights and options.
Contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation.