Canadian Employment Law Today

October 20, 2021

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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Canadian HR Reporter, 2021 4 Is infectious disease emergency leave a constructive dismissal in court? Two Ontario judges say yes, but a third says no Ontario courts debate COVID layoffs and constructive dismissal IN THE absence of express contractual au- thority to lay off, employers have always been liable to complaints or lawsuits for construc- tive dismissal. Most provincial governments attempted to mitigate that risk in May 2020 by introducing legislation allowing employ- ers to temporarily lay off employees for rea- sons related to the pandemic. In Ontario, the legislature added Infectious Disease Emer- gency Leave (IDEL) into the Employment Standards Act, 2000 (ESA). However, Ontario courts have been engaged in a debate over whether IDEL could still constitute construc- tive dismissal. The intent of IDEL was, in large part, to shield employers from liability for laying off without express contractual authority. The question that arose in May 2020 — and re - mains to this day — is whether IDEL insu- lated employers from court claims, as well as Ministry of Labour complaints. Ontario employers in particular continue to wait for definitive guidance from the prov- ince's legislature or the courts, despite recent court decisions dealing with this question. Dual regimes Under Ontario law, an employer may termi- nate without cause by providing lawful notice of termination and, if applicable, severance pay. Employers may specify an employee's entitlement to notice in a written contract of employment, provided the employer com - plies with the minimum requirements under the ESA. Those minimums include: notice or termination pay ranging from one to eight weeks, depending on years of service; and sev- erance pay if the employer's annual payroll exceeds $2.5 million and the employee has at least five years of service. If payable, severance is one week's wages for each year of service to a maximum of 26 weeks. In the absence of a valid contract, the em - ployee's entitlement to notice is determined by what is reasonable under the common law, which includes the ESA minimums. Reasonable notice will vary with the circum - stance of each case but will always exceed the minimums. Employees must sue in court to recover damages for the failure to provide reasonable notice. The dual regimes under the ESA and com - mon law work in concert, but they can be confusing for employers and practitioners unfamiliar with employment law. Effective- ly, employees have a choice upon dismissal — they can file a complaint with the Min- istry of Labour to enforce their minimum entitlements, or start a lawsuit in court for common-law reasonable notice. The ESA prohibits the employee from doing both. Constructive dismissal and COVID-19 The above principles apply if the employer dismisses the employee, or if the employer constructively dismisses the employee by unilaterally and substantially changing terms and conditions of employment. Until the pandemic, an employer who temporarily laid off an employee in the ab - sence of an express right to do so under a written employment agreement, or a clear past practice of laying off, constructively dismissed that employee. The layoff was considered a constructive dismissal for the purposes of ESA and common-law notice entitlements. As noted, in May 2020, the Ontario gov - ernment amended the ESA to create IDEL. A new regulation stipulated that a reduc- tion of hours or wages — a layoff — due to COVID-19 was not a constructive dismissal but, instead, a protected leave of absence. The effect was to suspend the ESA rules around when a temporary layoff becomes permanent and requires payment of the ESA minimums. The trade-off was that employers would be obliged to reinstate employees to their jobs at the conclusion of the IDEL. What the IDEL regulation did not stipu - late, however, was whether a laid-off employ- ee was also unable to sue under the common law for constructive dismissal. While it was clear that an employee could not claim ter- mination and severance pay under the ESA in response to a COVID-19-related layoff, could they still sue in court for common law reasonable notice? Conflicting court decisions Unfortunately, Ontario decisions have con - flicted on the issue. The first decision was Coutinho v. Ocular Health Centre in April 2021. Jessica Coutinho was employed as the office manager at an ophthalmology clinic called Ocular Health Centre. She was laid off in late May 2020. As there was no contract of employment ex - pressly permitting the employer to lay off, Coutinho made a claim for constructive dis- missal. Ocular defended the claim by arguing that her layoff was considered an IDEL and the ESA precluded a constructive dismissal claim under the ESA and the common law. The court held that a COVID-related lay - off did not prevent the employee from suing for damages in lieu of reasonable notice. The court relied on section 8(1) of the ESA which provides that "no civil remedy of an employ- ee against his or her employer is affected by this Act." The court also relied on the Min- istry of Labour's published guidance, which stated that the IDEL rules only applied to ESA entitlements, not the common law. In June 2021, the court released Fogel- man v. IFG. In that case, Gary Fogelman was placed on temporary layoff on March 16, 2020, due to the impact of COVID-19 on the business of his employer, IFG. The court came to the same conclusion as in Coutinho, again relying on Section 8(1). As Fogel - man's action for constructive dismissal was to recover damages for the failure to provide reasonable notice of termination, his action did not relate to a claim under the ESA, the court said. Days after Fogelman, the court released Taylor v. Hanley Hospitality and came to the opposite conclusion. Candace Taylor was employed at a Tim Hortons franchise, owned and operated by Hanley Hospitality. She was laid off on March 27, 2020, as a result of COVID-19. She was recalled a few months later, but she CASE IN POINT: CONSTRUCTIVE DISMISSAL Canada, and rest of the world, continues to be consumed with adapting to COVID-19. Early in the pandemic, many employers were forced to lay off staff. At least 18 months into the pandemic, layoffs remain part of the employer's toolkit and most Canadian jurisdictions have passed legislation extending the right of employers to issue temporary layoffs for reasons related to the pandemic. However, that right has become less certain as recent court decisions in Ontario have gone back-and-forth over employers' common-law right to lay off workers. BACKGROUND BY RISHI BANDHU IDEL provisions continue to be in place and, in fact, have been extended by the Ontario government and in other jurisdictions.

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