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Do Employers Have a Right to Layoff Employees?

Do Employers Have a Right to Layoff Employees?

July 21, 2023

By Brian Babcock

Can an Ontario employer lay off a nonunionized employee?

In most situations, the answer is “no.”


For the employer to be able to lay off the worker without risk of the worker claiming that they have been dismissed, the employment contract or agreement must contain an express or implied term permitting temporary layoffs. Without that agreement, a unilateral layoff is a substantial change in the terms of employment, triggering termination pay, possibly severance pay, and common-law damages for wrongful dismissal.

Courts are reluctant to imply a term, but until recently, there was no Court of Appeal decision as to whether or not prior layoffs of other employees was enough to imply a term in another employee’s contract.


In Pham v. Qualified Metal Fabricators Ltd., The Court of Appeal states, “The fact that a co-worker had been previously laid off does not create a legal basis for the employer to impose a layoff on the employee”. They also say the right to layoff “will not be readily implied”.

What do they mean by that?

If the employer is really on an implied right to layoff, the right must be “notorious, even obvious, from the facts of a particular situation”. The onus is solidly upon the employer to establish that the right exists.

Pham also considers the concept of condonation of the layoff. Once again, the court favours the employee, quoting a prior Court of Appeal decision which stated:

[W]hile it may be reasonable to find that an employer’s burden to establish condonation is discharged where the employee has continued to work for a lengthy period of time despite the employer’s impugned conduct, it is more difficult to conclude that condonation has been established where the employee has been unable to work because of the very conduct that establishes the constructive dismissal. [31]

Although each situation is fact-specific, this is a significant hurdle for employers.  Because employees are viewed as vulnerable, they are permitted some reasonable time to assess the changed situation before electing to treat the change as a constructive dismissal.

Condonation will only be found to have occurred where there is some positive act by the employee, such as express consent to the layoff.

Condonation is difficult when the employee is not working. Employees are not required to ask when they might be called back to work before claiming constructive dismissal.


  • Courts continue to view employees as vulnerable and in need of protection.
  • If you are an employer and wish to have a right to make temporary layoffs, your contracts should explicitly say so.
  • Though each situation is fact-specific, absent an express term, it is unlikely that a court will find an implied right to layoff.
  • Condonation of a layoff is also difficult to prove unless the employee expressly agrees, and even then, the court will likely give them time to assess the effect of the layoff.


Whether you are an employer or employee, the growing complexity of the rules surrounding  employment contracts and dismissal requires that you obtain timely advice.

At Weilers LLP, we have a track record of over 75 years in employment law in Thunder Bay and throughout Northwestern Ontario. Our progressive approach melds with this proud tradition to put our clients’ best interests first. This equips us to give you the sound advice you need, whether drafting an agreement or dealing with downsizing.

For the timely advice you need, give us a call and find out if Weilers LLP are the right lawyers for you.