Taylor v. Salytics Inc. — Ontario appeal court upholds ESA-compliant temporary layoff clause

Case
Taylor v. Salytics Inc.
Court
Court of Appeal for Ontario (Canada)
Date Decided
September 3, 2026
Citation
2026 ONCA 621
Topics
Employment law, temporary layoffs, constructive dismissal, termination clauses

Background

Barry Taylor worked for Salytics Inc. under a 2013 employment agreement that permitted temporary layoffs in accordance with the Employment Standards Act, 2000 (ESA). In February 2024, amid Salytics’ financial difficulties, Taylor agreed to a temporary 20 percent reduction in hours and pay. The company subsequently placed him on a temporary layoff effective April 1, 2024, while continuing his benefits but providing no income.

Salytics recalled Taylor to full-time work effective September 30, 2024, at his pre-reduction position, hours, and salary. Before returning, Taylor applied for a declaration that the layoff was a constructive dismissal and sought damages based on 12 months’ notice. The application judge dismissed the claim, and Taylor appealed.

The Court’s Holding

The Court of Appeal dismissed the appeal. It held that the agreement’s temporary-layoff provision was not a termination clause for ESA purposes. Under s. 56, a layoff becomes a termination only when it exceeds the statutory period for a temporary layoff; the ESA expressly provides that a qualifying temporary layoff, including one without a specified recall date, is not a termination.

Salytics conceded that its for-cause termination clause was invalid, which would invalidate the agreement’s termination clauses under Waksdale. But that did not invalidate the separate temporary-layoff provision. The clause expressly limited layoffs to those implemented in accordance with the ESA, and therefore did not purport to contract below statutory minimums. Its placement under a “Termination” heading did not alter its substance.

Key Takeaways

  • An ESA-compliant contractual right to impose a temporary layoff is not automatically a termination clause.
  • A temporary layoff within the limits in ESA s. 56 is not a termination, even if no recall date is specified.
  • An invalid for-cause termination provision does not invalidate a distinct temporary-layoff clause that does not function as a termination clause.

Why It Matters

The decision confirms that Ontario employers may contract for temporary layoffs, provided the clause confines the layoff to the ESA framework. Such a clause can displace the common-law rule that a unilateral layoff ordinarily constitutes constructive dismissal.

The court also drew a firm distinction between temporary layoffs and indefinite or overlong layoffs. Employers cannot rely on the decision for layoff language that permits arrangements outside the ESA’s temporary-layoff limits.

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