A Good Reminder That Layoffs Need To Be Spelled Out in Contracts feature image

A Good Reminder That Layoffs Need To Be Spelled Out in Contracts

For those working in industries with seasonal peaks and valleys, temporary layoffs can be an unfortunate reality. Layoffs are not the same as terminations, though the two terms are sometimes used interchangeably from time to time. The Provincial Court of Alberta recently issued a decision where it took a moment to cover the differences between the two.

The employment history

The employee was a commercial pilot who started working with the employer on June 16, 2014. The employer operates a business of charter and scheduled flights as well as medivac flying.

The employment handbook provided to the employee referenced layoffs, stating “upon completion of 12 months of service employees will be entitled to severance pay upon termination or layoff .” However, the employee’s actual contract did made no mention of layoffs. The handbook also stated it was “not an employment contract and should not be treated as such.”

While the employee had some performance issues over the years, it was determined at trial that he was never at risk of being terminated for cause.

Termination or layoff?

The employee was notified by telephone on June 30, 2016 that the company was “doing some restructuring and some downsizing here and unfortunately we are calling to let you know that we do have to lay you off effective today.” The employee was asked to return all of his key cards that same day. He also found out he had been locked out of the company’s website. The employee testified that at this point he felt as though he had been terminated, and not laid off.

The employee was provided with a record of employment on July 19, 2016 stating the reason he was let go was due to “shortage of work/end of contract season.” There was no expected date of recall provided, and severance pay was given to the employee.

The employee began looking for new work. It was not until September 13 of that year that he was provided with a recall letter. The employee responded by indicating he had intended to proceed with an action for constructive dismissal.

The employee was not able to find work until May 2017, and did not receive any payment for work between his layoff and his starting of new work.

The court’s analysis

While the employee took the position that he had been terminated, the employer argued he had been laid off. It was up to the court to determine what had actually occurred.

The court indicated it did not plan to give any weight to the terms of the handbook. Instead, it relied on the employment contract, which made no mention of layoffs. Common law requires employment contracts to grant the right for employers to lay off employees. In this case, since the contract was silent on layoffs, the employer had no right to do so.

As a result, the court found “the defendant terminated the plaintiff’s employment without cause.  I find there is no evidence and a complete failure resting upon the defendant to establish the plaintiff breached his contract to the extent that the defendant was entitled to terminate the plaintiff’s employment without notice.  I am further of the opinion that having regard to the length of service, the duties and scope of the services provided, the level of responsibility, the age of the plaintiff and the circumstances of his termination that he was entitled to five months notice of the termination of his employment.”

When it comes to employment contracts and workplace policies, the employment team at HMC Lawyers is an invaluable resource for employers and employees. We offer exceptional and responsive service to help our clients avoid exposure to unnecessary legal risk and potential disputes.

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