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Bulletin | The HR Space

COVID Layoff converted to Leave by Ontario Regulation still a Constructive Dismissal

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Overview

Labour, Employment & Human Rights Bulletin | HR Space

Many Ontario employers were forced by the pandemic to make difficult 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 - risked exposing employers to liability for constructive dismissal.

In June of 2020, the Ontario government published O. Reg 228/20: Infectious Disease Emergency Leave (the “Regulation”) under the Employment Standards Act, 2000 (“ESA”) to help relieve non-unionized employers from some of these liabilities. The Regulation provides that, between March 1, 2020 and July 3, 2021, a non-unionized employee whose employer has temporarily reduced or eliminated their hours of work or wages for reasons related to COVID-19 is deemed to be on a job-protected “infectious disease emergency leave” and is not considered to be laid off for the purposes of the ESA. The Regulation states that the temporary reduction or elimination of an employee’s hours of work or wages for reasons related to COVID-19 is not considered to be a constructive dismissal under the ESA.

A recent Ontario court decision confirms that the Regulation does not protect an Ontario employer from a claim for constructive dismissal at common law arising from a layoff related to COVID-19.

The Facts

The employee worked as an Office Manager at an ophthalmology clinic. On May 29, 2020, the employee was told that she was being placed on a temporary layoff and that a Record of Employment would be issued. The employee was not provided with an anticipated date for return to work but was informed that the employer would do its best to recall her as soon as possible.

The employee sued for constructive dismissal. The employer asked the court, before trial, to dismiss the claim on the basis that the employee was on a deemed infectious disease emergency leave pursuant to the Regulation. The employer also said it had cause to terminate.

The Decision

The court decided that the employee:

  • was entitled to treat the employer’s unilaterally imposed unpaid temporary layoff as bringing her contract of employment to an end;
  • had the immediate right to sue for constructive dismissal; and
  • was not barred by the Regulation from bringing an action against the employer at common law.

 

Importantly, the court found that the Regulation only prevents an employee from bringing a statutory complaint for constructive dismissal under the ESA. It does not affect an employee’s right to pursue a civil claim for constructive dismissal under the common law.

The court relied on:

  • section 8 of the ESA, which states that the ESA does not affect an employee’s civil remedies against his or her employer; and
  • the Ministry of Labour, Training and Skills Development’s online guide, which states: “The rules affect only what constitutes a constructive dismissal under the ESA. These rules do not address what constitutes a constructive dismissal at common law.”

 

The court highlighted the well-established common law rule that an employer has no right to unilaterally lay off an employee, unless there is an agreement between the employer and employee to the contrary.  A unilateral temporary layoff that is not agreed to between an employer and employee is a substantial change to an employee’s terms of employment and will be a constructive dismissal.

The court refused the employer’s request to dismiss the claim, and allowed the claim to proceed to trial.

 

Key Takeaways

This is an important decision.  It confirms the very limited scope of the protection provided by the Regulation. Ontario employers who laid off or reduced hours due to COVID-19 may be protected from statutory claims under the ESA alleging constructive dismissal, but they are not protected from common law claims. Employers may still be able to avoid common law liability if they have an express contractual right to unilaterally lay off employees, or another defence applies.

The Regulation was an important step but it still leaves Ontario employers who are grappling with the impact of continually changing COVID-19 public health measures on their business with insufficient protections.

If you need advice on this subject, please contact the author or your regular Fasken lawyer.

 

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