Home Constructive Dismissal Airline’s argument fails: Canada Labour Code doesn’t allow for layoffs absent contractual right

Airline’s argument fails: Canada Labour Code doesn’t allow for layoffs absent contractual right

by HR Law Canada

An Alberta charter airline has lost its argument that the Canada Labour Code (CLC) gave it the right to layoff one of its pilots.

Northern Air Charter took the position that the CLC modified the common law, allowing federally regulated employers to layoff employees without having specifically contracted for the right to do so. In its view, the right to lay off an employee arises whether the worker pursues a remedy under the CLC or at common law.

The trial judge ruled in favour of the pilot, awarding him more than $33,000 in damages. Northern Air appealed that ruling to the Court of King’s Bench of Alberta.

On appeal, the employer argued the trial judge erred in treating the stoppage of employment as a termination, rather than a layoff that did not require notice. It also said the end of employment was a constructive dismissal that the pilot had acquiesced to and, further, that he failed to mitigate his damages when he refused an offer of re-employment.


MD began working for Northern Air, a chartered airline, in June 2014. He worked in Peace River and Edmonton before beginning work in Calgary in late 2015.

When he began in 2014, he received an offer of employment setting out the basic terms. A year later, in June 2015, he entered into an employment contract that outlined his pay and hours. It also provided for performance reviews and termination by “either party, with written notice that complies with Employment Standards for the Province of Alberta.”

The airline also had a written handbook, not mentioned in the contract, that contemplated circumstances which could result in a temporary layoff with the possibility of recall or permanent position elimination. The handbook also stated that its provisions “were not an employment contract and should not be treated as such.”

On Oct. 28, 2015, MD and the airline entered into a further employment agreement that promoted him to the position of Base Captain. It allowed for termination of employment in compliance with the Employment Standards Code for Alberta and “applicable Federal regulations.” It did not reference the handbook.

None of MD’s three employment agreements referred to the possibility of layoff.

The layoff or termination

MD’s employment ended on June 30, 2016. In a phone call, he was told: “We are doing some restructuring and some downsizing here and unfortunately we are calling to let you know that we have to lay you off effective today.”

He was told to return his access cards to Northern Air that evening, and that all future communication would be by email as a matter or protocol. He was immediately locked out of the company’s website.

It then sent an email to staff stating that “as of today (MD) is no longer employed with Northern Air. We wish (MD) all the best in his future endeavors.” At that time, it had never laid off an employee before — but it has done so subsequently, the court said.

It issued a record of employment (ROE) on July 19, 2016, stating that the termination was due to “shortage of work/end of contract or season.” It said the date of recall was unknown and did not indicate MD might be returning.

On July 21, MD’s lawyer contacted Northern Air to advise it that he took the position that his employment had been terminated. Northern Air responded on Aug. 5 stating he had been laid off, not terminated.

On July 28, Northern Air issued a second ROE that listed insurable earnings and pay in lieu of notice of $3,333.33. MD said he did not receive the pay in lieu of notice, and that allegation was not denied by the employer.

On Aug. 28, MD’s lawyer responded to Northern Air stating that if his employment had not been terminated, then it had repudiated his contract and MD accepted that repudiation.

On Sept. 15, Northern Air sent MD a recall letter. MD’s counsel advised the employer that he intended to proceed with an action for constructive dismissal. On Sept. 20, the airline told him the letter was either a recall of employment or a job offer. MD declined to accept either.

He filed his claim against Northern Air on Sept. 23, 2016, and found new employment in May 2017.

The original trial

The trial judge ruled the handbook had no bearing on his employment because the employment agreements did not mention it and it explicitly stated it was not an employment agreement.

It also found the employment contract from October 2015 was somewhat contradictory – as it referenced both provincial and federal regulations. It found the terms “contradictory and therefore unenforceable.”

It ruled the contractual relationship between MD and Northern Air did not give the employer the right to lay him off.

The appeal

The Court of King’s Bench of Alberta said the trial judge erred with respect to the application of the federal Canada Labour Code (CLC) only applying if the parties agreed to its application.

Because Northern Air is a federally regulated employer, operating aircraft and engaging in air transportation, MD’s employment was governed by Part III of the Canada Labour Code (CLC), it said.

Northern Air argued the CLC modified the common law, allowing employers subject to it to lay off employees without having specifically contracted for the right to do so. In Northern Air’s view, a federally regulated employer’s right to lay off an employee arises whether the employee pursues a remedy under the CLC or pursues a remedy at common law.

CLC provides alternative to common law, but it’s still an option: Court

But the appeal court disagreed.

“The better interpretation of the CLC is that it creates an alternative to the common law, one with distinct substantive rights for both employers and employees, while still allowing the common law as an option for employees,” it said. “The CLC creates an alternative to the common law but does not modify the application of the common law in cases where employees – as is their right – choose to pursue remedies pursuant to the common law.”

The airline could have used the layoff defence if MD has pursued relief through the CLC.

“Since (MD) chose instead to pursue his remedy through the common law, Northern Air can only assert a right to lay off (MD) through operation of the common law – i.e., through locating that right in the terms of its employment agreement with (MD),” it said.

It also rejected the employer’s argument that the right to layoff MD should be an implied term of the agreement, flowing from the language in the employee handbook; the structure of the governing CLC; and the practices of the industry.

“The terms of the Employment Handbook show Northern Air was alert to the possibility that it would seek to lay off its employees. As such, it could have chosen to include that language in its employment agreements, yet it did not do so,” the court said.

It also noted, other than saying the word “layoff” in the phone call, the airline’s actions sent a message that the employment relationship was in fact over.

“It had him deliver his access cards and keys. It locked him out of the website. It told other employees he was not employed with Northern Air. It wished him the best in his future endeavors,” it said.

Failure to mitigate

The appeal court also agreed MD did not fail to mitigate his damages by accepting the offer to return to Northern Air.

MD was not given notice by his employer, and he had been out of work for two-and-a-half months, which was half the notice period he was entitled to as found by the trial judge.

“Northern Air did not offer to make (MD) whole. As such, had (he) returned to work at Northern Air he would have been in the awkward position of either giving up his legal claim for notice, or being engaged in legal proceedings with his employer,” it said.

The appeal was dismissed, and costs were left to the parties to agree on — with the court remaining available if they were unable to come to an agreement.

For more information, see Northern Air Charter (PR) Inc v Dunbar, 2023 ABKB 171 (CanLII)

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