Canadian Employment Law Today

July 14, 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 Canadian Employment Law Today Canadian Employment Law Today | | 7 More Cases More Cases The IDEL regulation specifically states that a reduction of hours or wages for a COVID- 19-related reason between March 1, 2020 and July 3, 2021 (since extended to Sept. 25, 2021) is not a constructive dismissal: "7. (1) The following does not constitute constructive dismissal if it occurred during the COVID-19 period: 1. A temporary reduction or elimination of an employee's hours of work by the em - ployer for reasons related to the designated infectious disease. 2. A temporary reduction in an employee's wages by the employer for reasons related to the designated infectious disease…." While the IDEL regulation settled the matter with respect to a constructive dismissal under the ESA, the question remained: Could a lay - off or substantial reduction in hours related to COVID-19 still constitute a constructive dis- missal at common law? According to first court decision in Coutinho v. Ocular Health Centre, the answer was yes. In Coutinho, the employer argued that, given the unprecedented emergency brought on by COVID-19, the IDEL regulation ought to pre - clude both statutory and common law construc- tive dismissal claims. That is, a layoff related to COVID-19 should not constitute a constructive dismissal under either the ESA or common law. The judge rejected this argument, conclud- ing that while the IDEL regulation precluded a claim of constructive dismissal under the ESA, it did not affect an individual's right to pursue a common law claim. Relying on s. 8 of the ESA — which states, "Subject to s. 97, no civil rem - edy of an employee against his or her employer is affected by this act" — the judge held: "In my view, the scope of s. 7 deeming a tem- porary lay-off for reasons related to COVID-19 to not constitute a constructive dismissal is constrained by s. 8(1) of the ESA. It is not pos- sible to reconcile the interpretation of the IDEL Regulation urged by [the employer] with the section of the statute which unequivocally pro- vides that an employee's civil remedy against her/his employee shall not be affected by any provision of the act." The judge also quoted from a publication of the Ontario Ministry of Labour, Training and Skills Development, which stated: "These rules affect only what constitutes a constructive dis - missal under the ESA. These rules do not ad- dress what constitutes a constructive dismissal at common law." Same issue – different result Rejecting the decision in Coutinho as "absurd," Justice J.E. Ferguson in Taylor v. Hanley Hospital - ity Inc. ruled that the court could and should take judicial notice of the exceptional nature of COVID-19 and its impact on Canadian busi- ness and employment; something the previous decision did not consider. Justice Ferguson's reasons are summarized as follows: • In response to a global pandemic, the legislature triggered a state of emergency and required employers to cease or curtail their operations. • Various levels of government have un - dertaken a variety of evolving emergency measures to attempt to mitigate the effects of the pandemic; those measures included the complete closure of certain businesses and restrictions on how certain businesses can operate. • Through no choice of their own, some employers have had to temporarily close their businesses or cut back their opera - tions, laying off employees and/or reducing employee hours. • This exposed employers to for claims of statutory and common law constructive dismissal. To avoid those consequences, the legislature enacted the IDEL regulation, which expressly states that an employee whose hours of work are temporarily reduced or eliminated, or whose wages are temporarily reduced, for reasons related to COVID-19, is not considered to be on a lay - off, but on a statutory IDEL leave instead. • Section 8 of the ESA does not prevent the ESA from displacing the common law; section 8 merely confirms that the ESA does not establish an exclusive forum to seek redress for issues involving the ESA. This was confirmed by the Court of Appeal for Ontario in Elsegood v. Cambridge Spring Service (2001) Ltd. — a dismissal matter under the ESA in which the court 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." • Accordingly, the IDEL regulation can and did change the common law and any argument regarding the common law and layoffs is therefore "inapplicable and ir - relevant." Concluding that "it should be obvious to the world what the legislature's intention was," Justice Ferguson wrote: "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 re - sult." Justice Ferguson agreed with the employer's position that "exceptional situations call for exceptional measures" and there was "inherent unfairness in subjecting employers to wrong - ful dismissal claims as a result of the govern- ment imposing a state of emergency." She added that had the government not passed the IDEL regulation, constructive dismissal claims "would only serve to make the economic crises from the pandemic even worse." Lessons for employers While this ruling is welcome news for employ - ers, there is no question the courts or legisla- ture must resolve these conflicting decisions. In the interim, we emphasize that the po- tential for exposure resulting from a tempo- rary layoff can be reduced if there is a writ- ten employment agreement that gives the employer the right to temporarily lay off an employee. Absent an express or implied term in the employment contract, or an employee's consent, there is no right to lay off at com - mon law. Historically, most employment agreements have not included a layoff provision. Howev- er, simply changing employment agreements without consideration isn't advisable as a uni- lateral change of this nature may be unenforce- able. For more information, see: • Taylor v. Hanley Hospitality Inc, 2021 ONSC 3135 (Ont. S.C.J.). • Coutinho v. Ocular Health Centre, 2021 ONSC 3076 (Ont. S.C.J.). • Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831 (Ont. C.A.). Sherrard Kuzz LLP is a management-side em- ployment and labour law firm in Toronto. They can be reached at (416) 603-0700 (Main), (416) 420-0738 (24 hours) or by visiting www. Earlier decision kept protections under common law and legislation separate « from A COURSE CORRECTION on page 1 The court said that courts should take judicial notice of the exceptional nature of COVID-19 and its impact on Canadian business and employment.

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