The Sound of Silence: Pham v. Qualified Metal Fabricators Ltd.

June 5, 2023
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The Sound of Silence: Pham v. Qualified Metal Fabricators Ltd.

The recent Ontario Court of Appeal decision, Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255, serves as a cautionary tale for employers who attempt to equate employee silence to condonation, and highlights the difficulties in relying on implied terms in the context of temporary layoffs.

Timeline of Events

The key facts of the case occurred over a series of years:

  • October 2000: Pham commenced employment as a welder with Qualified Metal Fabricators Ltd. (“Qualified Metal”).
  • 2009: Qualified Metal laid off a portion of its employees (the “2009 Layoff”). Pham was not included in this layoff.
  • March 2020: Pham was temporarily laid off for 13 weeks and signed a layoff letter which informed him that an existing “work agreement” provided Qualified Metal with the right to put him on a temporary layoff.
  • June 2020: The temporary layoff was extended for a period of up to 35 weeks.
  • September 2020: The temporary layoff was extended again and was deemed to be Infectious Disease Emergency Leave.
  • December 2020: The temporary layoff was extended again. Pham retained legal counsel and advised that he would be advancing a wrongful dismissal claim.
  • January 2021: Pham issued a claim for wrongful dismissal. Qualified Metal brought a motion for summary judgment, seeking dismissal of the action. Pham brought a cross-motion for summary judgment claiming wrongful dismissal, effective March 2020.

Motion Judge Decision

The Motion Judge found:

  1. Pham had condoned the temporary layoff as Pham did not object to the layoff and acted too slowly after retaining legal counsel.
  2. Due to the 2009 Layoff, Pham had essentially agreed to an implied term permitting layoffs.

Pham’s decision to wait 9 months to allege constructive dismissal was found to extend beyond the reasonable limits in the circumstances. Furthermore, due to the 2009 Layoff, the Motion Judge stated that Pham was “aware of the possibility” of layoffs at Qualified Metal. Even though Pham was not part of the 2009 Layoff, the Motion Judge determined that the existence of the layoff constituted an implied term of Pham’s contract.

On these bases, the Motion Judge ruled that there was no genuine issue requiring trial and dismissed Pham’s claim.

Ontario Court of Appeal Decision

The Ontario Court of Appeal allowed Pham’s appeal and set aside the order dismissing his claim.

In making this ruling, the Court articulated the following 5 points.

  1. Positive Action

The Court clearly ruled that an employee’s silence in the face of a temporary layoff does not constitute condonation of the layoff. For an employer to prove that an employee condoned a temporary layoff, the employer must be able to demonstrate “positive action” by the employee, such that the employer would believe that the employee freely consented to the change. There was no evidence of positive action in this case. The Court specifically noted that the layoff letter Pham had signed did not constitute condonation, as there was no proof that his signature was anything more than an acknowledgement of the terms set by Qualified Metal. Also, although Pham had contacted legal counsel in December 2020, there was no evidence that Pham was aware of the ramifications of the layoff or consented to the layoff.

  1. Reasonable Time to Assess

In considering whether Pham had objected to a fundamental change to the employment relationship within a reasonable time, the Court stated that an employee is allowed to take a reasonable amount of time to assess changes before they are forced to take an “irrevocable legal position.” The Court determined that Pham’s “wait and see” approach was a genuine issue that the Motion Judge ought to have considered.

  1. Past Practice Not Indicative of Implied Term

Qualified Metal’s argument that the 2009 Layoff constituted an implied term of Pham’s agreement was rejected by the Court. The Court highlighted an employer’s obligation to demonstrate that temporary layoffs are permitted.

  1. A Barrier to Condonation

The Court commented that an employee may be unable to condone changes to their employment if they are not actively working during the period the change was made.

  1. No Duty to Inquire

Finally, the Court ruled that there is no requirement for an employee to ask when they might be called back to work before commencing an action for constructive dismissal.

Ultimately, the Court decided that there was a genuine issue requiring trial and remitted the action for wrongful dismissal back to the Superior Court.

Takeaways

This is a noteworthy decision for employers. As a best practice, employers should:

  • Build express layoff terms into employment agreements to mitigate the risk of having to demonstrate an implied term.
  • Seek positive action on the part of an employee who appears to have condoned a temporary layoff and remember that inaction does not equate to condonation.
  • Provide employees with reasonable time to assess changes to the terms of their employment relationship.

Employees can walk away from this case with the knowledge that they have time to consider any changes their employer has brought to the table. It is always prudent to seek legal advice about any new terms or conditions, as they may constitute an alteration of a fundamental term of employment.

For more information or employment law advice, contact a lawyer at Turnpenney Milne LLP.