Ontario, Canada Court Decides Employees Laid Off During COVID-19 May Not Claim Constructive Dismissal at Common Law

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Just six weeks after holding in Coutinho v. Ocular Health Centre Ltd. that Ontario Regulation 228/20 (IDEL Regulation) under the Employment Standards Act, 2000 (ESA) did not remove an employee’s common law right to claim constructive dismissal arising from a layoff during the COVID-19 pandemic, the Ontario Superior Court of Justice (SCJ) came to the opposite conclusion. In Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, the SCJ decided that the IDEL Regulation precludes an employee who was laid off during the pandemic from claiming constructive dismissal at common law. 

The IDEL Regulation provides that an employee in a non-unionized workplace who, any time during the “COVID-19 period” does not perform the duties of their position because their work hours are temporarily reduced or eliminated by their employer for reasons related to COVID-19, is deemed to be on Infectious Disease Emergency Leave (IDEL).  The current definition of COVID-19 period is March 1, 2020 until September 25, 2021 (the end date has been extended more than once).   

At common law, unless there is an agreement providing otherwise, a court can find a constructive dismissal when a significant change is made to a fundamental term or condition of an employment agreement, including a layoff when hours are temporarily reduced or eliminated. 

Background

In March 2020, the employee was temporarily laid off from her employment due to the pandemic.  She did not resign.  In August 2020, the employee was advised in writing that she would be recalled to her employment effective September 3, 2020.  She returned to her employment and continues to be employed.   

The employee claimed that her temporary layoff was a constructive dismissal and that the IDEL Regulation does not displace the common law doctrine of constructive dismissal.  The employer argued that the employee’s temporary layoff was not a constructive dismissal and that the employee was deemed to be on emergency leave.

Decision

The Hanley Health court asserted that the court’s analysis in Ocular Health was wrong and it was not bound by it. 

Furthermore, it stated that, among other things, the IDEL Regulation “provides that a temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to COVID-19 during the COVID-19 period does not constitute constructive dismissal." In support of this conclusion, the court pointed to s. 7(1) of the IDEL Regulation, which provides that the temporary reduction or elimination of an employee’s hours of work by the employer for reasons related to COVID-19 does not constitute constructive dismissal.

The court concluded:

All temporary layoffs relating to COVID-19 are deemed to be IDELs, retroactive to March 1, 2020 and prospective to the end of the COVID-19 period.  As such, the plaintiff’s layoff is no longer a layoff.  It is an IDEL and the normal rights of statutory leaves are applicable (e.g., reinstatement rights, benefit continuation).  This means any argument regarding the common law on layoffs has become inapplicable and irrelevant.

Finally, the Hanley Hospitality court also stated that it agreed with the employer’s submissions regarding Ocular Health, including that:

  • Ocular Health “offends the rules of statutory interpretation to give an interpretation that renders legislation meaningless.”
  • “The employee cannot be on a leave of absence for ESA purposes and yet terminated by constructive dismissal for common law purposes.  That is an absurd result.”  
  • Section 8(1) of the ESA, which provides that, subject to s. 97 of the ESA, no civil remedy of an employee against their employer is affected by the ESA, has never been interpreted as preventing the ESA from displacing the common law, as the court did in Ocular Health.  In fact, the Court of Appeal said the opposite in Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831, a constructive dismissal case, when it stated, “Simply put, statutes enacted by the legislature displace the common law” and it is “a faulty premise that the common law continues to operate independently of the ESA.”  The Court of Appeal decision is binding on both the Ocular Health and Hanley Hospitality courts.
  • When Ontario triggered a state of emergency, employers were required to cease or curtail operations and this forced them to lay off employees or reduce their hours of work.  Because this left employers exposed to claims of constructive dismissal at common law, Ontario created the IDEL Regulation to remove the exposure it had created and “it should be obvious to the world what the legislature’s intention was by doing so.”
  • Statutes, including the ESA, can displace the common law, which “evolves as the changing times make it necessary to do so.”
  • The IDEL Regulation “can and did change the common law.  Effectively, ‘in these circumstances (COVID), you are not laid off, not constructively dismissed, and you are on statutory leave of absence.’” 

Bottom Line for Employers

Employers are likely to prefer the decision in Hanley Hospitality over the decision in Ocular Health, since Hanley Hospitality provides that the IDEL Regulation removes an employee’s common law right during the “COVID-19 period” to claim constructive dismissal.  There have been reports that both the Ocular Health and Hanley Hospitality decisions have been appealed, however, so we expect the Court of Appeal to provide a definitive answer.  In the meantime, the completely contradictory decisions in Ocular Health and Hanley Hospitality leave the law in a very ambiguous state. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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