Executive Summary: Key Legal and Evidentiary Issues

• The Divisional Court considered whether continued employment after a unilateral layoff amounted to condonation of the employer's breach of contract.
   
• Central to the appeal was whether silence following a layoff letter could be treated as acceptance of altered employment terms.
   
• Justice Schreck examined whether wage payments made under the Employment Standards Act constituted an actual return to work.
   
• Another issue was whether a lawyer's letter alleging constructive dismissal must be followed immediately by litigation to remain legally effective.
   
• Mitigation through continued employment was also considered, specifically whether a formal re-employment offer is required for it to count.
   
• Lastly, the court reviewed whether the trial judge erred in her selective reliance on a Workplace Safety and Insurance Board exhibit.
   

Facts of the case

Lee Flohr had worked as a senior server for the Susur Lee Group Inc., which operates a restaurant in Toronto, since 2015. He typically worked 35 hours per week, earning an hourly wage plus gratuities, mainly in the restaurant's private dining area. On March 18, 2023, Flohr and other staff received a letter advising them of a temporary layoff effective March 12, 2023, while the restaurant relocated; the letter estimated a reopening in May 2023 and included a section for employees to acknowledge the layoff, which Flohr declined to sign. On April 18, 2023, the respondent advised staff that the anticipated May recall would not happen. Flohr retained an employment lawyer on May 4, 2023. On May 18, 2023, he was told to return to work on June 12, 2023, with the same compensation and schedule as before the layoff once operations resumed, with the first two weeks devoted to training and setup.

The restaurant did not reopen on June 12, 2023, but Flohr began receiving an hourly wage of $16.55, calculated from his last seven weeks of work before the layoff. He was not working shifts or earning gratuities during this period. On June 20, 2023, Flohr's lawyer wrote to the respondent asserting that the March 12 layoff constituted a constructive dismissal and proposing settlement terms; the respondent did not respond. The restaurant resumed operations on July 28, 2023, but Flohr received less work in the private dining area than before and declined shifts offered in the main dining area, viewing the reassignment as a demotion. He commenced a Small Claims Court claim on December 12, 2023, while continuing to work for the respondent [the decision refers to this claim inconsistently, describing it in one passage as a claim "for constructive dismissal" and elsewhere as an action "for wrongful dismissal"].

Policy and legislative provisions at issue

The appeal turned on the interaction between the common law of constructive dismissal and statutory obligations under the Employment Standards Act, 2000 ("ESA"). The court noted that Flohr's resumed wage payments as of June 12, 2023 were most likely made to avoid a statutory deemed termination under section 56 of the ESA, rather than reflecting an actual resumption of the restaurant's operations or Flohr's regular working conditions. The appeal was brought under section 31 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

Reasoning and analysis

Justice Schreck reaffirmed the established framework for constructive dismissal: an employer's unilateral breach of an essential contractual term amounts to constructive dismissal, and an employee may either accept the change or treat it as repudiation and sue, provided the election is made within a reasonable time. Acceptance or condonation must be shown through positive conduct, since silence alone is insufficient, and the burden of proving condonation rests on the employer.

The trial judge had dismissed Flohr's claim, finding that he condoned the layoff by not asserting constructive dismissal before his recall, by accepting the recall and subsequent wages, by waiting six months after his lawyer's letter to sue, and by continuing to work for the respondent. Justice Schreck identified several errors in this analysis. First, the trial judge wrongly treated Flohr's silence between the layoff and his recall as condonation, despite his refusal to sign the layoff acknowledgment. Second, she mischaracterized the June 12, 2023 date as a "return to work," when in fact the restaurant had not resumed operations and Flohr was not working shifts or earning gratuities; the resumed wages were more consistent with ESA compliance than a genuine restoration of his employment conditions. Third, she failed to properly weigh that Flohr was owed a reasonable period to assess the new circumstances, particularly since it was unclear when the restaurant would actually reopen. Fourth, she erred in concluding that the June 20, 2023 lawyer's letter was not an "irrevocable" election merely because Flohr did not file a Statement of Claim until December; the law required only clear communication of his position, not immediate litigation. Fifth, she misapprehended the doctrine of mitigation by requiring a formal offer of re-employment before Flohr's continued work could count as mitigation, when case law establishes that an employee may remain employed under protest to mitigate damages without such an offer, provided the employer is on notice that the employee does not accept the altered terms. The court rejected only the third ground of appeal, concerning the trial judge's treatment of a WSIB exhibit, finding no basis to interfere with that discretionary evidentiary finding.

Ruling and overall outcome

The Divisional Court allowed the appeal, holding that the trial judge made several extricable errors of law in her condonation and mitigation analysis. The decision dismissing Flohr's claim, along with the costs order made in the respondent's favour, was set aside, and the matter was remitted to the Small Claims Court for a new trial before a different Deputy Judge. Lee Flohr, the appellant, was the successful party on the appeal, and Justice Schreck fixed costs of the appeal at $2,500.00, all-inclusive, payable by the respondent, Susur Lee Group Inc., to the appellant.