Taylor v. Salytics Inc.
Introduction
This case study examines Taylor v. Salytics Inc., 2025 ONSC 3461 (CanLII), a recent Ontario Superior Court decision addressing whether a temporary layoff provision in an employment contract constitutes a termination clause under the Employment Standards Act, 2000 (ESA). The case highlights the legal complexities surrounding layoffs, constructive dismissal, and the enforceability of contractual termination provisions.
Background
Barry Taylor, a Senior Technical Consultant at Salytics Inc., was employed for 11 years before being temporarily laid off in March 2024 due to the company’s financial difficulties. His employment contract included a termination clause with three sub-clauses:
- Termination for cause.
- Termination without cause (with ESA minimum notice).
- Temporary layoff in accordance with the ESA.
Taylor argued that the layoff was a constructive dismissal because the termination provisions in his contract were void for non-compliance with the ESA. Salytics contended that the layoff was lawful under the contract and the ESA.
Key Legal Issues
- Was the temporary layoff provision a “termination clause” under the ESA?
- If yes, and if other termination clauses were invalid, the entire termination provision would be void, making the layoff a constructive dismissal.
- If no, the layoff was lawful under the contract.
- If the layoff was a constructive dismissal, how should damages be calculated?
- Should damages be based on Taylor’s original salary or his temporarily reduced salary?
The Contract Clauses in Dispute
Taylor’s 2013 employment contract included the following provisions under the heading “Termination”:
Termination
- “Salytics may terminate your employment at any time for cause.”
- *”Salytics may terminate your employment without cause at any time by providing you with the minimum notice, or pay in lieu of such notice, and any severance pay required by the Employment Standards Act, 2000 and no more except in the event a lay-off is required within the first six (6) months of your employment without cause, you will be entitled to continue receiving salary up to the end of this six-month period.”*
- *”In the event a temporary lay-off is ever required, it may be implemented in accordance with the requirements of the Employment Standards Act, 2000.”*
Critical Issue:
- Were these clauses termination provisions (making the layoff a constructive dismissal if invalid)?
- Or was the layoff clause standalone and enforceable?
Court’s Decision
1. Layoff Provisions ≠ Termination Clauses
The court ruled:
- The layoff clause (Clause 3) was valid and separate from termination clauses.
- Why?
- The ESA (s. 56(4)) explicitly states that temporary layoffs (when compliant) are not terminations.
- Waksdale v. Swegon North America Inc. (2020 ONCA 391) requires courts to look at substance, not labels (e.g., the “Termination” heading didn’t control the layoff clause).
2. Termination Clauses Were Void – But Irrelevant
- The “for cause” clause (Clause 1) violated the ESA (no notice/pay for misconduct).
- Under Waksdale, this invalidated all termination clauses (Clauses 1–2).
- But: The layoff clause (Clause 3) survived because it was not a termination provision.
3. Damages (Hypothetical Scenario)
Had the layoff been ruled a constructive dismissal:
- Notice Period: 6 months (based on Taylor’s 11-year tenure).
- Salary Basis: Original salary ($117,300), not the reduced rate ($93,840) – to prevent ESA evasion.
- Vacation Pay: 6% of wages (ESA minimum).
4. Outcome
- The court dismissed Taylor’s application, upholding the validity of the layoff provision.
Key Takeaways for Employers:
- Ensure ESA compliance for all termination provisions (even “for cause” clauses). A single violation voids all termination terms.
- Temporary layoff clauses are not termination provisions under the ESA. Follow ESA temporary layoff rules (e.g., ≤13 weeks in 20 weeks, or ≤35 weeks in 52 weeks with benefits).
- Document layoffs as standalone rights (not tied to termination).
- Do not rely on last-minute pay reductions to reduce notice entitlements. Courts may ignore them (as here).
- Recall employees within ESA layoff timelines to maintain “temporary” status.
- Courts will assess the substance of contractual terms, not just their headings (Waksdale principle).
- However, to prevent this challenge in the first place, employers are advised to separate layoff and termination clauses clearly. Avoid grouping them under the same heading of termination.
- Employees temporarily laid off in compliance with the ESA cannot claim constructive dismissal.
This case reinforces the importance of precise contractual language and the judiciary’s role in balancing employer flexibility with employee protections under employment law.
