Bennett Jones LLPLast month, we wrote about a recent decision of the Ontario Superior Court in Coutinho v Ocular Health Centre, which found that employees placed on a temporary leave under O. Reg 228/20 Infectious Disease Emergency Leave (the IDEL regulation) could make a common law claim for constructive dismissal.

This month, we write about two even more recent and conflicting decisions of the Ontario Superior Court: Taylor v Hanley Hospitality Inc. and Fogelman v IFG–International Financial Group Ltd. (at the time of writing, the Fogelman decision has not yet been published)—which have created further uncertainty about the effect of the IDEL regulation on common law claims for constructive dismissal.

The Taylor Decision: Infectious Disease Emergency Leave Does Not Equal Constructive Dismissal

In Taylor, the Ontario Superior Court found that employees placed on temporary leaves under the IDEL regulation are deemed to be on a statutory leave under the Employment Standards Act (Ontario) (ESA), and are therefore not constructively dismissed.

The issue before the Court in Taylor (as it was in Coutinho) was whether the IDEL regulation restricts an employee's right to pursue a common law action for constructive dismissal against his or her employer as a result of being placed on IDEL. In finding that the IDEL regulation did restrict common law constructive dismissal claims, the Court in Taylor held that an employee cannot be on a statutory leave and have been constructively dismissed at common law as that was an "absurd result" and as such, any argument about the "common law on layoffs has become inapplicable and irrelevant."

In Coutinho, the Court had relied on section 8(1) of the ESA to limit the scope of the IDEL regulation from applying to common law claims of constructive dismissal. In rejecting that analysis, the Court in Taylor found that the IDEL regulation changed the common law, and was not constrained by the application of section 8(1) of the ESA. In support of its finding, the Court relied on a prior decision of the Ontario Court of Appeal, which dealt with a constructive dismissal and the application of the ESA, and in which the Court explicitly held that statutes displace the common law.

In dismissing the plaintiff's action, the Court in Taylor considered the context in which the IDEL regulation was enacted, finding that it was the legislature that exposed employers to claims of common law constructive dismissal when it triggered a state of emergency, requiring employers to cease or curtail their operations. To avoid the consequences for employers, the legislature amended the ESA to create the IDEL regulation, thereby solving the very problem it created and taking away the exposure that arose from its own action.

The Fogelman Decision: Infectious Disease Emergency Leave Does Equal Constructive Dismissal

In contrast to Taylor (and in accordance with Coutinho) the Court in Fogelman found that as the plaintiff was not pursuing his rights on termination under the ESA, but was pursuing a common law remedy, the IDEL regulation did not apply and he was not restricted from pursuing a common law action for constructive dismissal against his former employer.

The plaintiff had been placed on a temporary leave on March 16, 2020, due to the effects of the COVID-19 pandemic on his employer's business. Shortly after being placed on temporary leave, the plaintiff retained counsel and took the position that he had been constructively dismissed.

In finding that the IDEL regulation did not preclude the plaintiff's common law claim of constructive dismissal, the Court relied on section 8(1) of the ESA, finding that the section explicitly provides that the ESA does not supersede civil remedies available to employees at common law or in equity. As in Coutinho, the Court also referenced the Ontario Ministry of Labour's online publication, which noted that the IDEL regulation does not address what constitutes a constructive dismissal at common law.

The Court found that in the alternative, the plaintiff's claim was not precluded by the IDEL regulation as a result of the exception set out under subsection 7(2) of the regulation—which holds that the exceptions to findings of constructive dismissal do not apply to an employee whose employment was terminated under section 56(1)(b) of the ESA before May 29, 2020.

Unfortunately, the Court in Fogelman did not have the benefit of the Taylor decision (which was released five days later) and did not reference the Coutinho decision, which was released after the hearing in January 2021, but before the release of the Court's decision in Fogelman.

In assessing damages, the Court declined to deduct from the damages any payments the plaintiff received under the Canada Emergency Response Benefit Act (the CERB Payments). In deciding this point, the Court relied primarily on a previous decision of the Court in Iriotakis v Peninsula Employment Services Limited, which reached the same conclusion, ultimately finding that the CERB Payments should not be treated as income for mitigation purposes.

Also troubling in the Fogelman decision was the Court's award of $25,000 in punitive damages against the employer. Punitive damages were justified in part due to the employer's litigation conduct (which included deliberately making service of the claim difficult), but also because the employer failed to pay the plaintiff his ESA minimums once it "received notice that [he] considered the lay-off to be constructive dismissal." The Court then found that the failure to comply with the ESA was an independent actionable wrong that was "outrageous and reprehensible" and was ultimately deserving of punitive sanction.

Significance for Employers

The decisions in Taylor and Fogelman are inconsistent and create further confusion concerning the effect of the IDEL regulation for employees and employers. Unfortunately, this confusion will likely continue in Ontario until the Ontario Court of Appeal provides clarity on the IDEL regulation and its impact on claims of constructive dismissal at common law.

The award of punitive damages in Fogelman is another warning to employers that claims of constructive dismissal are fraught with potentially significant liability if not handled with care.