Canada: Infectious Disease Emergency Leave Does Not Shield An Employer From Constructive Dismissal At Common Law

A recent decision of the Ontario Superior Court has dealt yet another blow to employers in the wake of the ongoing COVID-19 pandemic. The decision of Justice D.A. Broad in Coutinho v Ocular Health Centre, released April 27, 2021, is the first to interpret the recently enacted O. Reg. 228/20 Infectious Disease Emergency Leave (the "IDEL regulation") and determine the effect of the IDEL regulation on claims of alleged constructive dismissal at common law.

In dismissing the employer's motion for summary judgment, the Court found that where an employer places an employee on a temporary leave under the IDEL regulation, the leave could nonetheless constitute a constructive dismissal at common law, and does not restrict the employee's right to pursue a common law action for constructive dismissal against his or her employer.

The Court found that as a result of section 8(1) of the Employment Standards Act (Ontario) (ESA)-which holds that no civil remedy of an employee against his or her employer is affected by the ESA-the scope of the IDEL regulation, which is necessarily constrained by the ESA, could not be interpreted to remove an employee's right of action for constructive dismissal against his or her employer at common law.

The Court also relied on the Ontario Ministry of Labour's online publication (the "Ministry Guide") concerning the temporary changes to the ESA brought about as a result of COVID-19. Under the heading "Constructive Dismissal", the Ministry Guide addressed the effect of the IDEL regulation on constructive dismissals under the ESA, highlighting that the regulation does not "address what constitutes a constructive dismissal at common law." The Court held that although the Ministry Guide was not binding, it was of assistance to understand the Ministry's intention in promulgating the IDEL regulation, including that it would not affect an employee's common law right to a claim of constructive dismissal.

In closing on the issue of constructive dismissal and the inapplicability of the IDEL regulation at common law, the Court reiterated that, absent an agreement to the contrary, an employer has no right to lay off an employee at common law.

The Court appears to have focused narrowly on the issue of whether the IDEL regulation prevented a claim at common law and, based on the written reasons, does not appear to have considered arguments for adapting the common law test for constructive dismissal in light of the novel circumstances of the pandemic. However, issues including an employer's intentions, the dire situation faced by employers whose businesses were decimated by the pandemic and whose employees were subject to strict governmental stay-at-home orders, and the legislature's clear intent in enacting the IDEL regulation, are all legitimate factors that could impact a constructive dismissal analysis at common law.

Significance for Employers

The Coutinho decision will be of particular interest to businesses that have had to make the difficult decision over the past 14 months to place employees on temporary leaves due to the devastating effects of COVID-19 on operations across the province (and country) and have not yet recalled those staff to work. Once thought to shield employers from a potential flood of constructive dismissal claims, Coutinho makes clear that the IDEL regulation does not restrict employees' rights at common law to assert claims of constructive dismissal.

Note that Ms. Coutinho did not return to work after being placed on an IDEL and was not pursuing a claim for back wages. It may in future be alleged in other cases that such a decision also means that employees who were placed on an IDEL and subsequently returned to work have a claim for breach of contract/back wages at common law for the period they were on the IDEL, but that issue was not before the Court in Coutinho.

It is important for employers faced with newly-raised claims of constructive dismissal to seek expert advice at the earliest opportunity. Should you have any questions regarding the impact of this decision and how it may affect your business, please contact the Bennett Jones Employment Services group.

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