When can a temporary layoff lead to constructive dismissal?

With the pandemic subsiding and temporary layoffs ending, we should expect to see many cases brought forth by employees alleging constructive dismissal.

And employers should be worried because employees may be right, according to Stuart Rudner, founder and CEO of Rudner Law in Toronto. He is speaking at an exclusive Master Class webinar for UKG on the topic of employee terminations.

“Some employers assume they can make any change to the work arrangement. So, for example, we’ve seen the employer announce to staff that for the next month or two, or for an indefinite period of time, ‘You're not going to work, and we're not going to pay you,’” he says.

That is a layoff, and, to put it simply, that’s constructive dismissal, says Rudner.

“Employers implement changes, make decisions about work schedules, and don't realize what they’re doing is effectively instituting a termination. And, usually, that wasn’t the intended outcome!”

Too often, employers over-estimate their rights, he says. Sometimes, they try a DIY approach to understanding them, citing a business owner who went online to find the Employment Standards Act and calculate how much severance an employee was owed, along with talking to the Ministry of Labour.

“Those may sound like the right steps to take. However,  now the company is being sued for wrongful dismissal because they didn't provide common law notice or severance entitlements,” says Rudner,

“Employers often don't realize that the laws impacting employment are complex and fail to get all the relevant information. For example, there are several sources of entitlement upon termination. And they also don't realize that things like variable pay may have to be provided during the notice period. So it's not enough to simply continue paying salary during notice; if the person was receiving bonuses or commissions or incentive payments, those often have to continue, as well as things like medical and dental benefits, car allowance and life insurance. So, the termination process can get very complicated.”

Another area that often trips up employers is after-acquired cause, says Rudner. Essentially, that’s when somebody is let go on a without-cause basis, but then the employer discovers something that could have given them just cause to fire the person.

“Here’s a typical scenario: Your organization is downsizing, so you let someone go. When that individual gives back their laptop and [the employer] goes to clean it, they find that they were stealing confidential information or… engaging in other inappropriate conduct. So now they may have had just cause for termination.”

It’s a legitimate legal concept — but only if the employer discovered the issue after the employee was let go and couldn't have reasonably been expected to find out before.

“After-acquired cause can't be something you learned about a few months ago and decided to let go. Now that the employee is suing you for more severance, you want to say you have just cause. But, no, you've missed your opportunity; it has to be something you legitimately didn't know about and didn’t simply choose to ignore at the time.”

For more great tips and insights, sign up for UKG’s Employee Terminations Master Class.