





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



DATE: 20111223



DOCKET: C53625



COURT OF APPEAL FOR ONTARIO



Blair and Juriansz
          JJ.A and Pepall J. (
ad hoc
)



BETWEEN



Brian Elsegood



Plaintiff (Respondent)



and



Cambridge Spring Service (2001) Ltd.



Defendant (Appellant)



J. Sebastian Winny, for the appellant



Robert A. Konduros, for the respondent



Heard: October 24, 2011



On appeal from the order of Justice Dale Parayeski of the Divisional
          Court dated January 25, 2011, with reasons reported at [2011] O.J. No. 488.



Juriansz J.A.:



[1]

This appeal
    raises the novel legal question of whether the operation of s. 56(1) of the
Employment
    Standards Act
, 2000, S.O. 2000, c. 41 (ESA) can support an employees
    claim for common law damages. Section 56(1)(c) of the ESA provides that an
    employer terminates the employment of an employee for purposes of section 54
    if the employer lays the employee off for 35 weeks in a period of 52
    consecutive weeks.

[2]

The respondent
    employee had been in the appellant employers employ for some seven years as a
    spring technician. The employment relationship was not governed by a written
    contract. He was 48 years old at the time of his termination. He was laid off
    twice. He was laid off for the first time on April 4, 2009, and then was recalled
    on June 9, 2009. He was laid off again on July 28, 2009. On January 22, 2010,
    the cumulative duration of the layoffs reached the statutory maximum of 35
    weeks within a 52-week period. Until January 22, 2010, the employee considered
    that he remained on the employers payroll subject to recall.

[3]

Upon the
    length of this layoff reaching 35 weeks, the employee brought a claim for
    common law damages for wrongful dismissal in the Small Claims Court rather than
    claiming termination pay under s. 54 of the ESA. Holub Deputy J. awarded him $9,900
    in damages reflecting a notice period of six months together with interest and
    costs of $2,060. The employers appeal to the Divisional Court was dismissed by
    Parayeski J.

Issue

[4]

The employers
    appeal is based on a simple premise:
the ESA and the common law are
    independent regimes; an employees actual employment status is defined by the
    common law, and the ESA operates only to entitle the employee to the remedies
    under the ESA. On this premise,
common law damages for wrongful
    dismissal are only available for what would constitute a dismissal at common law
    and are not available for a deemed termination under the ESA. This leads to
    the issue in the case:

Did the
    Divisional Court err by refusing to set aside the trial judges award of common
    law damages based on the employees termination by the operation of s. 56(1) of
    the ESA?

Analysis

[5]

In
    my view, s. 56(1) of the ESA operates to terminate an employees employment in
    law, so that the employee may claim for common law wrongful dismissal damages. I
    reach this conclusion in two ways. First, I do not accept the employers
    premise
that the ESA and common law
    operate as two independent regimes. I conclude that a
n
    employees employment status simply does not survive termination by a valid
    enactment of the legislature.

Second,
    accepting the employer
s premise for the sake
    of argument,
an employee laid off for more than 35 weeks in a 52-week
    period would be able, in every case, to claim constructive dismissal at common
    law.
I discuss these two lines of analysis in turn.


A
    section 56(1) Termination is a Termination for all Purposes

[6]

I
    do not accept the employers premise that an employees employment status
    survives a statutory termination by the ESA. Simply put, statutes enacted by
    the legislature displace the common law.

[7]

At
    the outset, I note that although the employer refers to a termination under s.
    56(1) as a deemed termination, s. 56(1) does not use the word deemed. The
    word deemed appears in s. 56(5), which provides that employment terminated
    under s. 56(1)(c) shall be deemed to be terminated on the first day of the
    lay-off. The word deemed refers to the date of the termination and not the
    termination itself.

[8]

The
    employer also relies on the phrase in s. 56(1) that provides that the employee
    is terminated for purposes of section 54 of the ESA. The employer argues this
    means that the employee is not terminated for all purposes, but only for the
    purposes of s. 54. However, s. 54 does not bear on the character of the
    termination under s. 56(1); instead, s. 54 prohibits an employer from
    terminating an employee without notice
or payment in lieu of notice
. If
    anything, s. 54 undermines the employers argument, because it applies
    generally in all cases to require the employer to give notice whenever an
    employee is terminated.

[9]

The
    employer proposes the scenario where the employee would actually be on a
    prolonged indefinite layoff, but terminated for the purposes of the statute. I
    find it telling that the employer offers no date when a prolonged indefinite
    layoff would become a termination. It is telling because in the employers
    scenario, there is no date when the employer becomes responsible for
    termination pay in lieu of notice. The evident purpose of s. 54 is to prevent
    employers from avoiding the liabilities that flow from terminating the
    employment of employees under the guise of placing them on indefinite layoff.
    The legislature has provided that when a layoff reaches 35 weeks in 52, the
    employee is terminated. The legislatures action leaves no room for the
    continued operation of the common law respecting when an employee is terminated.

[10]

I
    find it unnecessary to discuss the employers reliance on a single sentence in
    the minority reasons in
National
    Automobile, Aerospace Transportation and General Workers Union of Canada (CAW 
    Canada), Local No. 27 v. London Machinery Inc.
(2006), 79 O.R. (3d) 444 (C.A.).
    The case is of limited assistance. It involved a collective agreement and the
    ESA has special provisions governing unionized employees. In any event, the
    majority held that an employee subject to a collective agreement that preserved
    recall rights up to two years could elect to accept the statutory termination
    of his employment at 35 weeks on layoff.

[11]

I
    see no merit in the employers further argument that the courts have already
    found that the common law continues to operate despite the enactment of the
    ESA. The employer argues that the courts have found that an employee continues
    to be able to claim common law damages for wrongful dismissal despite the
    enactment of the ESAs termination pay provisions. However, it must be
    remembered the statute itself provides for the continued application of the
    common law in that context.  As Iacobucci J. pointed out, at para. 25 of
Machtinger
:

It is also
    clear from ss. 4 and 6 of the Act that the minimum notice periods set out in
    the Act do not operate to displace the presumption at common law of reasonable
    notice. Section 6 of the Act states that the Act does not affect the right of
    an employee to seek a civil remedy from his or her employer. Section 4(2)
    states that a right, benefit, term or condition of employment under a
    contract that provides a greater benefit to an employee than the standards set
    out in the Act shall prevail over the standards in the Act. I have no
    difficulty in concluding that the common law presumption of reasonable notice
    is a benefit, which, if the period of notice required by the common law is
    greater than that required by the Act, will, if otherwise applicable, prevail
    over the notice period set out in the Act. Any possible doubt on this question
    is dispelled by s. 4(1) of the Act, which expressly deems the employment
    standards set out in the Act to be minimum requirements only.

[12]

My conclusion
    that s. 56(1) terminates an employees employment disposes of the appeal.

[13]

Nevertheless,
    to further demonstrate the employers position is untenable I go on to consider
    what would be the result if one accepted that the employees employment at
    common law survived the operation of s. 56(1).

Termination
    under the ESA Would Result in Termination at Common Law

[14]

At
    common law, an employer has no right to layoff an employee. Absent an agreement
    to the contrary, a unilateral layoff by an employer is a substantial change in
    the employees employment, and would be a constructive dismissal.

[15]

In
    this case, the employer asserts that the employment agreement contained an
    implied term that allowed the employee to be placed on an indefinite layoff. The
    employee had accepted a previous layoff and recall, and he testified that he considered
    his employment to continue during the second layoff until it reached 35 weeks. Like
    the courts below, I find it unnecessary to decide exactly what the term of the
    agreement was. The analysis that follows applies even if the employment
    agreement contained an implied term allowing the employer to layoff the
    employee for more than 35 weeks within a consecutive 52-week period. I proceed
    as if that were the case.

[16]

The
    employers argument is that since the employee agreed to be laid off for an
    indeterminate period of time, his status at common law continued to be an
    employee on layoff subject to recall. The argument is untenable because, even accepting
    the faulty premise that the common law continues to operate independently of
    the ESA, the common law would always allow an employee laid off for more than 35
    weeks to claim constructive dismissal at common law. This is consistent with
    the provisions of s. 67(3) of the ESA, to which I will refer later and which
    entitle an employee to elect whether to be paid termination or severance pay or
    retain the right to be recalled. A term of an employment contract that provided
    otherwise would be null and void. This conclusion flows from
the Supreme Courts reasoning in
Machtinger
    v. HOJ Industries Ltd.,
[1992] 1 S.C.J. No. 41.

[17]

In
Machtinger
, two employees were dismissed in accordance with their
    written employment contracts. The employment contract of one of the employees
    allowed his termination without notice, and the contract of the other allowed
    termination on only two weeks notice. However, under the ESA they were
    entitled to a minimum notice period of four weeks. The trial judge, reasoning
    that the termination clauses in the contracts were invalid because they violated
    the ESA, held that the employees were entitled to reasonable notice of seven
    months and seven and a half months respectively.

[18]

On
    appeal, this court agreed that the termination provisions were null and void,
    but held that the termination provisions in the contracts supported the
    inference that the employees intended to agree to very short notice periods.
    Therefore, the Court of Appeal limited their entitlement to notice to the
    statutory period of four weeks.

[19]

The
    Supreme Court reinstated the trial decision. The Supreme Court held that if a
    term [of an employment contract] is null and void, then it is null and void for
    all purposes, and cannot be used as evidence of the parties intention (at
    para. 28). The employment contracts had to be interpreted and applied as not
    containing the offending provisions. Consequently, as the employment contracts
    did not address the matter of notice, the employees were entitled to reasonable
    notice at common law.

[20]

Germane to
    this case is
Machtingers
conclusion that a term of an employment
    agreement that is inconsistent with the ESA is null and void for all purposes.
    The offending term is not read down and interpreted to provide for the minimum
    standard imposed by the ESA. Rather, the agreement is interpreted and applied
    as not containing the offending term.

[21]

For the
    purposes of this discussion, I proceed on the basis that the employment
    agreement in this case had an implied term allowing the employer to place the
    employee on indefinite layoff exceeding 35 weeks in a 52 week period.
The
    minimum standard of the ESA is that layoff amounting to 35 weeks in 52 results
    in the termination of employment. Since the indefinite layoff provision of the
    agreement fails to meet the ESAs minimum standard, it is null and void.
The
    term is not read down to allow a layoff limited to 35 weeks in 52, but is
    excised from the agreement. The result is that the employment agreement is left
    without a term allowing any layoff at all and, if the common law applied, the
    employee could claim constructive dismissal as of the first day of the layoff.

[22]

I
    note that s. 67(3) of the ESA, despite the terms of s. 56(1), allows employees
    to forego receiving termination pay and retain their right of recall. Neither
    party made any reference to s. 67(3) in this case, and so I am reluctant to
    comment on it. Suffice it to say, I am satisfied that it does not change the
    analysis. A term in an employment contract that provides for a layoff exceeding
    35 weeks without providing the employee with the election available under s.
    67(3) would be null and void, because it fails to provide the minimum standard
    set out in the ESA. In any event, by commencing this action the employee in
    effect made his election uner s. 67(3) to be paid his termination in severance
    and not to retain any right to be recalled.

[23]

Thus,
    even if one accepts the premise that an individuals employment status continues
    at common law after a statutory termination under s. 56(1) of the ESA, the
    employee could claim constructive dismissal at

common
    law whenever a layoff exceeds 35 weeks in 52.

Conclusion

[24]

For these
    reasons, I would dismiss the appeal. The respondent is entitled to his costs of
    the appeal fixed in the amount of $15,000.00 inclusive of disbursements and all
    applicable taxes.


R.G. Juriansz J.A.

I agree R.A. Blair J.A.

I agree S.E. Pepall J.

RELEASED:
    December 23, 2011


