LeClair COVID Blast June 11, 2021

NEWS JUST IN: Temporary Layoffs, Infectious Disease Emergency Leave and Constructive Dismissal

  • Shutdowns and Lockdowns: As soon as the pandemic hit Canadian shores, businesses and workplaces were divided into essential and non-essential categories, with non-essential workplaces being forced to close and essential workplaces being forced to reduce operations (and headcount), in order to avoid their potential closure.
  • Temporary Layoffs: Initially, it was believed that the pandemic would be short lived, however, as we sit here some fifteen months later, a number of sectors are yet to re-open or to be fully restored. The pandemic compelled employers to pivot quickly and this systematically resulted in a sequence of temporary layoffs – regardless of whether employers were entitled to do so in their contracts of employment.
  • The Law: In many cases, employers were compelled to place their employees on a temporary layoff, despite their contracts of employment not providing for this in the first place. Doing so in these instances (unintentionally) invited the risk of constructive dismissal claims being brought, and even where contractual language had been included, employers still ran the risk of exceeding the maximum time periods, set by the Employment Standards Act, 2000 (“ESA”), which once exceeded, would result in the temporary layoff becoming a deemed termination.
  • Band-aid: Alive to all of these issues, the Ontario Government passed Regulation 220/20 (“the Regulation”), which in brief provided that a temporary layoff implemented in relation to nonunion employees and during the ‘COVID-19 Period’, was automatically converted to an Infectious Disease Emergency Leave (“IDEL”) by operation of law. Therefore, the (former) temporary layoff – now a leave under IDEL – was no longer subject to the time limits set by the ESA, nor was contractual language still a pre-requisite in order to avoid the risk of a constructive dismissal, which risk the Regulation specifically excluded.
  • Earlier this week we wrote about the COVID-19 Period being extended by Regulation 412/21 and accordingly, the IDEL period being extended to September 25, 2021.
  • Regardless, most employees have continued to take the view that the COVID-19 Period only ever excluded claims for constructive dismissal brought under the ESA - but did not limit their entitlements to still claim constructive dismissal under the common law. Following this interpretation, the band wagon started to roll in, together with a sharp increase in constructive dismissal related litigation.
  • The “Puck Drop”: A little over a month ago, the first decision on this issue was made in Coutinho v. Ocular Health Centre Ltd (“Ocular”), where the Court agreed with the employee-based interpretation, holding that the right to sue for constructive dismissal and at common law, was in no way limited by the Regulation.
  • The Court has now seen it our way: Even before Ocular and again thereafter, we have continued to take the position that the employee-based interpretation was wrong and that Ocular was unlikely to be the final determination of this issue.
  • Earlier this week the matter of Taylor v Hanley Hospitality Inc. (“Taylor”) was handed down, confirming, firstly, that Ocular was “wrong in law” and, therefore, not binding on the Court, and, secondly, that the ESA together with the Regulation, had the effect of (during the COVID-19 Period) overriding the common law doctrine and that those temporary layoffs did not constitute constructive dismissals. The Court further held that the interpretation applied in Ocular, if permitted to stand, would render the Regulation meaningless (which would be an absurd result). The Court also found that it had been the government action that had exposed employers to the legal risks set out above, and therefore the ESA amendments were meant to address the very problem that was first created when the government triggered the state of emergency.
  • Final word: Given the extent of interest in this issue, it is unlikely that Ocular or Taylor will be the final word, and we expect to see further matters still come before the Courts, together with a series of appeals. Having said that, our view remains that future matters will be decided along the lines of Taylor and potentially even expand on the reasons already advanced in its decision.

For specific questions, please feel free to reach out to us directly at – [email protected] (519) 859 6015