Many Ontario employers were forced by the pandemic to make difficult employment decisions to secure the future of their business and to preserve as many jobs as possible. Some of these unilateral actions - including layoffs and temporary reductions in pay and hours - could expose employers to liability.
The Ontario government published a new regulation that helps relieve non-unionized employers from some of these liabilities under the Employment Standards Act, 2000 ("ESA"). Most of the regulation does not apply to unionized employees. The regulation does apply to assignment employees.
New Deemed Infectious Disease Emergency Leave
The regulation designates COVID-19, SARS and MERS to be infectious diseases for the purposes of the existing infectious disease emergency leave under section 50.1 of the ESA. This leave was discussed in our previous bulletin. Entitlement to that leave is still retroactive to January 25, 2020.
For non-union employees, the designation of COVID-19 as an infectious disease is only from March 1, 2020 to six weeks after the date the emergency declared under the Emergency Management and Civil Protection Act ends. This time period is known as the COVID-19 Period. For this time period, the regulation creates a new category of infectious disease emergency leave applicable only to non-union employees.
This new category applies automatically where non-union employees' hours of work are temporarily reduced or eliminated due to a designated infectious disease.[i] Employees who do not perform their duties for this reason are automatically deemed to be on an infectious disease emergency leave for any time during the COVID-19 Period that they do not perform duties.
There are two exemptions to the deemed infectious disease emergency leave:
• On or after March 1, 2020, the employer (i) terminated or severed employment by dismissing the employee or otherwise refused to continue employing them (unless the parties agree to rescind that notice of termination); (ii) severed employment by laying the employee of because of a permanent discontinuance of all the employer's business at an establishment; or, (iii) the employee resigned during the statutory notice period in response to a notice of termination from the employer.
• Before May 29, 2020, (i) the employer constructively dismissed the employee and they resign in response within a reasonable period; or (ii) the employee was deemed terminated or severed because a layoff exceed the maximum duration under the ESA.
This means non-union employees laid off by employers after March 1, 2020 in response to COVID-19 are no longer on layoff. They are deemed to be on a statutory leave of absence under the ESA. The normal rights and obligations applicable to a statutory leave of absence apply with a few modifications. Employees are not required to give employers notice that they will take the leave. The obligation to continue benefits during leave is also modified:
• If the employee stopped participating in the benefit plan as of May 29, 2020, the employee is not entitled to benefit continuation during the COVID-19 Period; or
• If the employer stopped contributions to benefits as of May 29, 2020, the employer does not need to continue to make contributions.
This is important for employers who previously laid off non-union employees due to COVID-19 without benefit continuation during the layoff. These employers do not have to continue benefit coverage during the leave. Employers who elected to continue benefit coverage during a layoff (which is now deemed a statutory leave of absence) are likely required to continue benefit coverage during the leave.
Significantly, this means non-union employees who were laid off but are now deemed to be on a statutory leave have a statutory right to be reinstated to their pre-leave position at the end of the leave. These employees are also protected from reprisal under the ESA.
Reductions in Hours and Wages are Not a Layoff or Constructive Dismissal under ESA
The regulation deems that non-union employees are not laid off if their hours of work have been temporarily reduced or eliminated, or their wages have been temporarily reduced during the COVID-19 Period for reasons related to a designated infectious disease.
There are two exemptions:
• Employment was severed because the employer laid employees off because of a permanent discontinuance of the entire business at an establishment; and,
• Before May 29, 2020, employment was already deemed terminated or severed because a layoff exceeded the maximum duration under the ESA.
The regulation provides that non-union employees are not constructively dismissed if the following occurred during the COVID-19 Period for reasons related to a designated infection disease:
• A temporary reduction or elimination or hours of work; or
• A temporary reduction in an employee's wages.
This rule does not apply if before May 29, 2020 an employee was constructively dismissed by an employer and the employee resigned within a reasonable period in response.
This deemed no constructive dismissal provision appears only to apply to the ESA. These actions may, depending on the circumstances, still constitute a constructive dismissal at common law.
Certain ESA Complaints Deemed Not Filed
The regulation deems certain filed ESA complaints not to have been filed if they allege a temporary reduction or elimination in hours, or a temporary reduction in wages, constitutes termination or severance, and those changes occurred within the COVID-19 Period for reasons related to the designated infectious disease.
This deemed non-filing of complaints does not apply if the complaint relates to one of the following categories:
• The employer (i) terminated or severed employment by dismissing the employee or otherwise refused to continue employing them; (ii) severed employment by laying the employee off because of a permanent discontinuance of all the employer's business at an establishment; or, (iii) the employee resigned during the statutory notice period in response to a notice of termination from the employer.
• Before May 29, 2020, (i) the employer constructively dismissed the employee and the employee resigned in response within a reasonable period; or (ii) the employee was deemed terminated and/or severed because a layoff exceeded the maximum duration under the ESA.
Takeaways for Employers
The regulation is welcome news for non-unionized employers who temporarily reduced hours and/or wages, or laid off employees after March 1, 2020 in response to the pandemic. These employers may rely on the new regulation for temporary relief from some of the negative ESA consequences that would normally arise. Employers may still face legal liability for their actions at common law.
The regulation is not perfect relief. There are a number of technical and complicated exceptions that employers should review. In addition to those exemptions, the regulation only applies to temporary reductions in hours and wages after March 1, 2020. Permanent reductions by employers or reduction done prior to March 1, 2020 are not covered. Notably, the regulation will only provide relief until the end of the COVID-19 Period - six weeks after the state of emergency ends. If an employer's business has not recovered by that time, the normal ESA rules will apply.
The regulation is complicated and technical. Employers should get legal advice as they review their workforce planning measures and ensure that appropriate steps are taken to adapt to these new rules, including to manage the leaves and reinstatement of employees on new deemed leaves of absence.
[i] For purposes of the regulation, hours of work and wages are considered to be reduced:
• For employees who work a regular work week, if they work fewer hours or earn less regular wages in a workweek than they did in the last regular work week before March 1, 2020;
• For employees without a regular work week, if they work fewer hours or earn less regular wages in a work week than the average number of hours/regular wages in the period of 12 consecutive weeks before March 1, 2020;
• For employees not employed during the entire work week immediately before March 1, 2020, if the employees work fewer hours in the work week than they worked in the work week in which they worked the greatest number of hours.
If the employee was on vacation, not available for work, suspended, on strike or locked out for any part of the last work week before March 1, 2020 then the last week before March 1, 2020 in which these conditions were not present is used for this comparison.