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No Right to Layoff Non-Unionized Employee Absent Contract, Practice or Policy: Ontario Court

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An Ontario judge has held that employers do not have the right to layoff non-unionized employees if there is no lay off provision in the employees’ contracts of employment or employer policy. Absent such a provision, employees whom employers lay off will be deemed to be terminated and entitled to reasonable notice.

The employer’s kitchen cabinetry business fluctuated with the construction industry cycle. When the employer hired a designer in 1998, the employee’s written offer of employment did not contain a lay off provision, nor was she provided with a copy of the handbook which contained information about lay offs.

Ten years later, when the employee accepted a lateral position, she was obliged to sign a new offer of employment which stated that she had read and would follow the policies of the employee handbook. Aside from the ability to continue employment, the employee was not provided with any consideration for signing the written offer of employment.

The employer layed off the employee in fall 2010 with a recall date in summer 2011. The employee’s benefits were continued during the lay off. The employer recalled the employee to work in late spring 2011. The employee did not return to work and sued for wrongful dismissal.

The critical issue in this case was whether the employee abandoned her job without any further obligations from her employer or was wrongfully dismissed and entitled to reasonable notice.

The court held that the employee had been dismissed. In the absence of a contractual basis for the lay off, the device of a lay off does not exist in non-unionized workplaces at common law and any purported lay off would be a dismissal. In this case, there was no contractual basis for the employee’s lay off as there was no reference to lay off in the signed and returned letter of employment, nor was the employee handbook referenced or provided.

Even if the reference to the employee handbook ten years later was sufficient to constitute a contractual basis for the lay off, the court found that continuing employment cannot amount to consideration in exchange for change in the terms of employment. Something must pass to the employee in addition to what she is entitled to under the original contract. The court therefore awarded the employee ten months of reasonable notice.

McLean v. The Raywal Limited