Ontario dentist employers have spent the better part of the last six years getting beaten up by employment contract cases.
Ever since Waksdale v. Swegon North America Inc., employers have watched courts scrutinize termination provisions with a microscope. In Waksdale, one defective termination provision was enough to invalidate other termination language in the employment agreement—even though the employer was not relying on the offending provision.
The message to dentist employers was painful: if one part of your termination machinery violates the Employment Standards Act, 2000 (ESA), the whole thing may come crashing down.
So when an Ontario Court of Appeal decision actually gives employers some breathing room, we should pay attention. Enter Taylor v. Salytics Inc. And for dental practice owners, this one matters.
Remember COVID?
Dentists do. When COVID-19 arrived in March 2020, Ontario dental practices suddenly faced extraordinary restrictions on the services they could provide. Routine dentistry effectively stopped. Offices that had healthy patient schedules one week found themselves with little or no regular clinical work the next.
What were owners supposed to do with receptionists, assistants, hygienists and other team members? For many practices, the answer was a temporary layoff.
But there was a potentially enormous employment-law problem lurking underneath that decision. The ESA contains temporary layoff provisions. But that does not automatically mean an employer has a contractual right to temporarily lay off an employee.
At common law (which is judge-made law), unilaterally removing an employee from work and stopping their wages can amount to constructive dismissal (i.e. termination) unless the employer has the contractual right to do it. In other words, without the right language in an employment agreement, an employer facing a crisis could potentially say, “We need to temporarily lay you off,” only to have the employee respond, “No—you just constructively dismissed me. Pay me my termination entitlements.”
For a long-service dental employee, that exposure could be substantial. COVID showed us that events we once considered unimaginable can happen. Could there be another pandemic? A prolonged regulatory shutdown? A catastrophic building issue? A major economic downturn? That is why Taylor is so important.
What Happened in Taylor?
Barry Taylor worked for Salytics Inc. under a written employment agreement signed before he started working. Importantly, that agreement said: “In the event a temporary layoff is ever required, it may be implemented in accordance with the requirements of the Employment Standards Act, 2000.”
In 2024, Salytics ran into financial trouble. Taylor initially agreed to a temporary 20% reduction in hours and pay. Things got worse. On April 1, 2024, Salytics temporarily laid him off. His benefits continued, but he received no salary from Salytics during the layoff. He was eventually recalled and returned to full-time work on September 30, 2024. Taylor sued, arguing that the layoff amounted to constructive dismissal and seeking 12 months of notice damages.
There was another interesting wrinkle.
Salytics conceded that its employment agreement contained an invalid “for cause” termination provision! Under Waksdale, that meant the defective clause would invalidate the agreement’s other termination provisions. So Taylor essentially argued: the temporary layoff language appeared in the contract’s “Termination” section. If Waksdale requires the termination provisions to be read together, shouldn’t the defective termination clause take down the temporary layoff clause too?
Nice try. The Court of Appeal said: NO.
The Court Looked at Substance, Not the Heading
This is where Taylor becomes particularly refreshing for employers. The Court confirmed that the ESA itself distinguishes between a termination and a temporary layoff. A temporary layoff that complies with the ESA is not automatically a termination. More importantly, the Court refused to treat the temporary layoff provision as a termination clause simply because somebody had placed it underneath a heading called “Termination.”
The Court said an employment agreement must be interpreted as a whole. Sound familiar? That is actually the same interpretive concept relied upon in Waksdale. But this time, it helped the employer. Take that, Waksdale!
The Court emphasized that “the substance matters, not the form.” The layoff provision specifically referred to a temporary layoff carried out in accordance with the ESA. The parties had therefore expressly agreed that the employer could use the ESA’s temporary layoff regime. The Court was also unwilling to casually interfere with contractual freedom where the parties had expressly agreed to a lawful temporary layoff mechanism.
Salytics won. Taylor’s appeal was dismissed.
The Lesson for Dental Employers
The takeaway isn’t that every dental practice can now temporarily lay off employees whenever it wants. Absolutely not. The important lesson is that your employment agreement should expressly reserve the practice’s right to implement a temporary layoff in accordance with the ESA.
Without that contractual right, a unilateral layoff can still create a constructive dismissal problem. And don’t bury the issue inside sloppy termination language.
At DMC LLP, we prefer a properly drafted, stand-alone temporary layoff provision toward the end of the employment agreement that clearly gives the practice the contractual right to temporarily lay off the employee while remaining subject to the ESA. Because the next crisis probably won’t look exactly like COVID. But Taylor reminds us why good employment contracts are written for the problems we don’t see coming.
Dental practice owners who want their employment agreements reviewed or updated—including temporary layoff provisions—can contact DMC LLP.
