Court Rules on Temporary Layoff Clauses
In Taylor v. Salytics Inc., 2025 ONSC 3461, the Ontario Superior Court of Justice clarified a key issue for employers: whether a temporary layoff provision in an employment contract is considered a termination clause and subject to the same legal scrutiny.
The Court’s answer? Not necessarily.
This decision provides significant clarity for Ontario employers navigating layoffs during difficult economic periods, especially when paired with clear contractual language and compliance with the Employment Standards Act, 2000 (ESA).
This article explains what happened in the case, what it means for Ontario employers, and how to ensure your contracts stand up to legal scrutiny.
The Facts: What Happened in Taylor v. Salytics Inc.
The employee, Mr. Taylor, worked for Salytics Inc. for 11 years. In 2018, he was promoted to Senior Technical Consultant. Amid financial difficulties, the company and Mr. Taylor agreed to reduce his hours and pay by 20%. Just three weeks later, he was placed on a temporary layoff for six months without pay, though his benefits continued.
Mr. Taylor claimed this layoff amounted to a constructive dismissal, arguing that the layoff clause in his contract was an invalid termination provision. The employer disagreed, pointing to the clear layoff language in his employment contract.
The Dispute: Is a Layoff Clause a Termination Clause?
The employment contract contained a section titled “Termination,” which included three key statements:
- Employment may be terminated for cause.
- Without cause, termination entitles the employee to the minimum ESA notice or pay.
- A temporary layoff may be implemented by the ESA.
Salytics conceded that the “for cause” language was invalid because it did not meet ESA standards, specifically, it did not limit termination to cases of willful misconduct as required under Ontario law.
Mr. Taylor argued that since part of the termination clause was illegal, the entire section, including the layoff clause, should be void. If successful, this would open the door to a constructive dismissal claim.,
As Christopher Achkar, employment lawyer and founder of Achkar Law, explains:
“Temporary layoff provisions must be precise and compliant but don’t assume one invalid clause voids the entire agreement.This decision provides reassurance for employers who take the time to get their contracts right.”
The Court’s Decision: Layoff ≠ Termination
The Ontario Superior Court dismissed Mr. Taylor’s claim.
The Court ruled that a valid temporary layoff clause is not a termination clause, even if placed under the “Termination” heading in a contract. The judge emphasized that form does not override substance; the actual wording and intent of the clause matter more than where it appears.
Key findings included:
- A temporary layoff is not a termination under section 56(4) of the ESA.
- A contract can include a valid layoff clause, even if other termination-related clauses are unenforceable.
- The layoff clause, when clear and ESA-compliant, can shield employers from constructive dismissal claims.
Why This Case Matters for Ontario Employers
This case highlights several crucial takeaways for employers in Ontario:
1. Temporary Layoff Clauses Must Be Clear and ESA-Compliant
An express, well-drafted clause that permits temporary layoffs in line with the ESA can help protect against claims of constructive dismissal.
2. Invalid Termination Language Won’t Automatically Void Layoff Clauses
Even if part of your termination clause is unenforceable, like a “for cause” provision that violates the ESA, your layoff clause may still survive, provided it is distinct and properly constructed.
3. Placement in the Contract Doesn’t Determine Legal Validity
Don’t assume a clause is a “termination clause” simply because it’s located under a termination heading. Courts will focus on substance over structure.
What Ontario Employers Should Do Now
- To reduce legal exposure and ensure employment contracts are enforceable, Ontario employers should consider the following:
- Review existing employment contracts to identify problematic language especially in “termination” and “layoff” sections.
- Ensure temporary layoff clauses are clearly written, standalone, and explicitly comply with the ESA.
- Avoid using boilerplate or generic templates, which may contain outdated or non-compliant language.
- Work with experienced employment counsel to draft, revise, or enforce employment agreements.
How Achkar Law Can Help
At Achkar Law, we advise employers across Ontario on how to avoid costly pitfalls in employment contracts, layoffs, and terminations.
Whether you’re facing a constructive dismissal claim, considering temporary layoffs, or revising your employment agreements, our team can help:
- Review and update employment contracts
- Draft ESA-compliant layoff and termination provisions
- Defend employers in wrongful dismissal and constructive dismissal claims
- Provide legal training for HR teams and management
Contact Achkar Law
If you’re an Ontario employer and need guidance on temporary layoffs, terminations, or employment contract drafting, contact our team today.
Call toll-free: 1-800-771-7882 | Email: [email protected]
The article in this client update provides general information and should not be relied on as legal advice or opinion. This publication is copyrighted by Achkar Law Professional Corporation and may not be photocopied or reproduced in any form, in whole or in part, without the express permission of Achkar Law Professional Corporation. ©
Workplace Law Topics: Employment Agreements, Employee Terminations and Layoffs, Employment Litigation, Employment and Labour Compliance