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Layoffs: When Are They Implied and When Are They Condoned? Court of Appeal Reviews Principles in Pham v. Qualified Metal Fabricators Ltd. 2023 ONCA 255

7 minute read
Also authored by: Minki Jeong

Mr. Pham worked at Qualified Metal Fabricators for almost 20 years, from 2000 to 2020. In March 2020, Mr. Pham was laid off, along with 31 other employees, due to COVID-19 related budgetary considerations. Mr. Pham was informed that the layoff was temporary, for a period of thirteen weeks. This layoff period was extended in June 2020, and again in September 2020 and once again in December 2020. Mr. Pham brought a claim for wrongful dismissal in January 2021.

The Respondent, Qualified Metal Fabricators Ltd., brought a motion for summary judgment to dismiss the claim. The motion judge granted this motion, having made the finding that: (a) there was an implied agreement to layoff Mr. Pham because he was aware that many of his co-employees had been laid off in the past and (b) the appellant condoned the layoffs (and therefore was not wrongfully dismissed) by signing the letter provided to him when he was laid off; seeking legal advice; and/or not protesting his own layoff.

On appeal by Mr. Pham, the Ontario Court of Appeal set aside the motion judge’s decision and remitted the action for wrongful dismissal back to the Superior Court for trial.

In the course of their analysis, the Court of Appeal reviewed the following legal principles respecting implied terms permitting layoffs and condonation of layoffs:

  • Where the employment contract has no express term concerning layoffs, a right that an employer may do so will not be readily implied.
  • The fact that other employees were laid off does not constitute an implied term of the appellant’s contract of employment permitting his layoff.
  • The fact that a layoff was conducted in accordance with the ESA “is irrelevant to the question of whether it is a constructive dismissal”[1].
  • Condonation is a defence to a claim of constructive dismissal and the burden is on the employer to establish it. Condonation requires a determination that, viewed objectively, the employer would believe at the time that the employee “consented freely to the change”[2].
  • Condonation in the face of a layoff is expressed by positive action, such as expressed consent to the layoff or expressing a willingness to work before claiming wrongful dismissal.
  • An acknowledgment of receipt of the terms of a layoff does not constitute condonation of the layoff.
  • An employee is permitted reasonable time to assess contractual changes before they are forced to take on an irrevocable legal position, such as advancing a constructive dismissal claim.[3]
  • There is no requirement for an employee to ask when they might be called back to work before commencing an action for constructive dismissal.[4]

Implied terms permitting layoffs

Qualified Metal Fabricators argued that it had an implied right to lay off Mr. Pham due to its past practice of laying off employees in 2009. In making this argument, Qualified Metal Fabricators relied on Hefkey v. Blanchfield[5], for the proposition that an employer may rely on past layoff practices to establish an agreement allowing the employee to be temporarily laid off.

The Court of Appeal disagreed with such a broad assertion.

In addition to distinguishing Hefkey on the facts, the Court of Appeal held that Hefkey is premised on the “unsound legal foundation” that the employee has the “onus of establishing that his employment contract did not include a layoff provision”.  The court held that this premise is irreconcilable with the Court of Appeal’s decision in Elsegood v. Cambridge Spring Service (2001) Ltd.[6], which states that the employer has the onus to demonstrate that layoffs were permitted.

The court confirmed that the fact that other employees were laid off does not constitute an implied term of the appellant’s contract of employment permitting his layoff.

As a matter of general principle, the court held that a term concerning layoffs will not be “readily” implied into an employment contract; the “right to impose a layoff as an implied term must be notorious, even obvious, from the facts of a particular situation”[7]. A co-worker having been previously laid off does not cut it.

Condonation of layoffs

Qualified Metal Fabricators argued, and the motion judge accepted, that Mr. Pham had condoned his layoff on the basis that (a) he had signed the letter provided to him when he was laid off, (b) he sought legal advice and/or (c) he did not protest his layoff. The Court of Appeal found that these factors do not, in fact, establish condonation.

The Court of Appeal held that an employee’s signature on a letter advising an employee of the layoff and the terms of the same does not constitute condonation if there is no evidence that the signature was anything more than an acknowledgment of receipt of the terms of the layoff set by the employer.

The court also held that the fact that Mr. Pham contacted a lawyer in December 2020 for legal advice does not constitute condonation since there was no evidence that Qualified Metal Fabricators was aware that Mr. Pham received legal advice, let alone that they relied on that fact.

Finally, the court held that Mr. Pham’s “failure to object” to the layoff also does not constitute condonation. The Court confirmed that an employee is permitted reasonable time to assess contractual changes before they are forced to take an irrevocable legal position. Silence during these reasonable periods do not equate to condonation; condonation in the face of a layoff is expressed by positive action.


This decision affirms that the courts will not readily find that a term concerning layoffs is “implied”. Unless a term permitting layoffs is expressly built into an employment contract, employers will have a high threshold to meet in arguing that the term was implied. Without more, past layoff practices will likely not be sufficient.

This decision also affirms that the courts will not readily find that a layoff was condoned without clear and palpable evidence of the same. Silence, acknowledging receipt of the terms of a layoff, and/or taking reasonable time to assess the situation will not be sufficient to establish “condonation”. Something more – i.e. positive action – is needed to argue that the dismissal was condoned by the employee.

[1] Bevilacqua v. Gracious Living Corporation, 2016 ONSC 4127, at para. 9.

[2] Greaves v. Ontario Municipal Employees Retirement Board (1995), 1995 CanLII 7288 (ON SC), 129 D.L.R. (4th) 347, 15 C.C.E.L. (2d) 94, at para. 63 (Ont. Gen. Div.).

[3] Belton v. Liberty Insurance Co. of Canada (2004), 2004 CanLII 6668 (ON CA), 72 O.R. (3d) 81, 34 C.C.E.L. (3d) 203, at para. 26 (C.A.)

[4] Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, 71 C.C.E.L. (4th) 57, at paras. 54-55.

[5] Hefkey v. Blanchfield, 2020 ONSC 2438, 62 C.C.E.L. (4th) 223, at paras. 46-50

[6] Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831

[7] Michalski v. Cima Canada Inc., 2016 ONSC 1925, at para. 22.

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