A layoff can significantly impact an employee and be difficult to navigate, especially if the layoff is temporary or uncertain. During the pandemic, many experienced being laid off, and the court was required to clarify rules surrounding an employee’s rights and an employer’s obligations during a layoff. As businesses evolve, they may not find enough work for a certain role as they once did. Employees will need to look elsewhere for a full-time position. However, is accepting a new job during a layoff considered a resignation?

In this post, we will discuss whether accepting a new role is considered a resignation by the employee. This is important to determine, as it may affect the employee’s rights and the employer’s obligations. In particular, if the employer permanently terminates an employee after they accept a new job elsewhere, they may be liable for wrongful dismissal damages because this may not have meant that the employee resigned during a temporary layoff. We will discuss a case example, Hurlbut v Low & Low Limited, 2024 CanLII 28332 (ON SCSM), in which the court found that the employee did not resign during a temporary layoff when they accepted a new position with a different employer. This post will provide important takeaways for employees and employers to understand their rights and obligations during a layoff. 

What is a temporary layoff under the Ontario Employment Standards Act?

Under the Ontario Employment Standards Act, an employee may be on a temporary layoff if the employer limits or stops the employee’s work but has not ended their employment. For example, this may occur when there is not enough work to sustain a full-time role as the business needs change or due to external circumstances like during the pandemic. Since layoffs often involve some uncertainty, a layoff can still be considered temporary even if there is no specified date when the employee can return. 

It is also necessary to have terms in the employment contract that allow an employer to lay off an employee. Otherwise, it could be seen as a fundamental change to the employment contract and, therefore, a constructive dismissal. If this is the case, the employer may be liable for damages for constructive dismissal. 

How long can a temporary layoff be?

A layoff is considered temporary if it is less than 13 weeks for 20 continuous weeks. If the layoff is more than 13 weeks, it can still be considered a temporary layoff if it is less than 35 weeks in 52 weeks, if one or more of the following apply:

  1. The employer continues making substantial payments to the employee; 
  2. The employer continues to pay for the employee’s benefits under a group or employee insurance plan, or retirement or pension plan; 
  3. The employer pays the employee additional unemployment benefits; 
  4. The employee would have been entitled to receive additional unemployment benefits, but is not receiving them because they work elsewhere; 
  5. The employer recalls the employee within a time period that is approved by the Director of Employment Standards (ie. for a period longer than set out in the legislation);
  6. The employer recalls the employee within a time period as specified in an agreement with the employee (and union, if applicable).

If the employee is not recalled for longer than the period specified above, unless the Director otherwise approves it of Employment Standards, then the employee is considered to be terminated by the employer. In these cases, the employee would be entitled to termination pay from the employer. 

What are an employer’s obligations during a layoff?

Employers are not required to provide notice to employees of a temporary layoff. The employer is also not required to provide a reason for the layoff unless it is otherwise required in the employment contract. 

If the layoff is not considered a temporary layoff under the ESA, or the layoff is not permissible under the employment contract, then the employer may need to pay termination pay or damages for a constructive dismissal

What happens when an employee accepts a new job during a layoff?

When an employee accepts a new job during a temporary layoff, the employer may consider this as the end of their employment relationship. However, this is not always true, as seen in the Hurlbut case, where the employee’s acceptance of a new job after a layoff was not considered a resignation. 

Employee Accepting New Job Not Considered Resignation

In the Hurlbut case, the employee worked as a full-time funeral director for a funeral home since 2018. The parties did not have a written employment contract. The employee was laid off shortly after the pandemic began in March 2020. 

Initially, the employee requested the layoff so that she could care for her children at home. Later on, layoffs were required as the health protocols in the province restricted funeral services. This led to the employer closing one of their locations, and there needed to be more work for the employee. During the layoff, the parties were in communication, and while the employee had wanted to return, there was not enough work to sustain a full-time role. At this point, there was also uncertainty about the state of the pandemic that would affect funeral services. 

During the layoff, the employee accepted a new role with another employer. The funeral home owner was notified of this and claimed that this meant that the employee resigned. He issued an ROE in November 2020. Before issuing the ROE, the employer had continually paid the employee’s benefit premiums. 

However, the employee claimed she was wrongfully dismissed because she had not resigned. 

The court found that she could legally do so without resigning from her original position unless the contract restricted the employee from working for multiple employers. The court stated that the employer could have reached out to clarify whether the employee was resigning. There was also evidence that the employee advised her former employer that she wanted to return, given that her new role also paid significantly less and was not the same type of role that she held before.

Ultimately, the court found that the employee did not resign, and she was wrongfully dismissed. The employer was required to pay damages for wrongful dismissal

Key Takeaways 

During a temporary layoff, it is important to clarify if the employee intends to return, as securing a new role is not considered a resignation. Otherwise, the employer may be liable for damages caused by wrongful dismissal.

Contact Haynes Law Firm in Toronto for Advice on Termination and Wrongful Dismissal Claims

If an employee has not resigned and they are terminated, the employer may be liable for wrongful dismissal damages. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from termination. Our goal is to ensure that employees understand their rights and receive maximum compensation in wrongful dismissal cases. Haynes Law Firm also assists employers in avoiding liabilities that may arise from terminations that are not permitted by the legislation. We are dedicated to finding the best resolution for you.

To book a consultation, please contact us online or by phone at 416-593-2731.