Understanding the Legal Defense of Condonation in Constructive Dismissal Cases: The Impact Pham v. Qualified Metals Fabricators Ltd.

The recent decision in Pham v. Qualified Metal Fabricators Ltd., 2023 ONCA 255 has significant implications for the way constructive dismissal cases are analyzed in Ontario.

In this case, the plaintiff, Mr. Pham, brought a claim for wrongful dismissal against his former employer, Qualified Metal Fabricators Ltd., after receiving notice of a layoff that was subsequently extended several times due to financial losses caused by the COVID-19 pandemic. The employer, Qualified Metal Fabricators Ltd. brought a motion for summary judgment to dismiss the claim on the grounds that Mr. Pham had agreed to or condoned the layoffs. The motion judge granted the respondent's motion for summary judgment dismissing the claim for wrongful dismissal.

Mr. Pham appealed the decision, arguing that the motion judge erred in several ways, including in finding an implied agreement to layoff and condonation. Mr. Pham claimed that the issues of implied agreement and condonation and the legal implications thereof should be considered.

The defense of condonation in constructive dismissal cases can be a tricky one. It is based on the idea that if an employee continues to work without objecting to a significant change in employment terms, they are deemed to have accepted the change and cannot claim constructive dismissal later on. However, the employee's behavior must be objectively viewed as consent rather than mere acquiescence or resignation to the situation.

The employer, Qualified Metal Fabricators Ltd. argued that Mr. Pham had condoned the layoff by not objecting to it and seeking legal advice. They claimed that his actions indicated that he knew his rights and should have acted sooner to prevent the layoff. However, the Court of Appeal did not agree with this argument and found that Pham's actions did not amount to condonation.

In the Court's view, silence or lack of objection cannot be considered agreement or consent to the layoff. The Court further argued that seeking legal advice did not indicate that Mr. Pham had accepted the layoff as a permanent change in his employment terms. Instead, it demonstrated that he was trying to understand his options and rights. The court also noted that Mr. Pham had only accepted temporary work from the company after the layoff and had continued to look for new employment, which further showed that he had not accepted the layoff as a permanent change.

The Court of Appeal found that there was a genuine issue requiring a trial and that Qualified Metals breached the employment agreement and constructively dismissed Mr. Pham. Consequently, the Court of Appeal allowed the appeal, set aside the lower court's ruling, and remitted the case to the Superior Court.

This decision highlights the importance for employers to ensure that they are in compliance with the employment agreement and provide clear communication to their employees about the terms of their employment, including any changes to their employment status. Employees, on the other hand, should seek legal advice and fully understand the implications of any changes to their employment status before consenting or agreeing to any terms.