Canada: Temporary Layoffs During COVID-19 Can Amount To Constructive Dismissal Under Common Law – Coutinho V. Ocular Health Centre Ltd., 2021 ONSC 3076 (CanLII)

In earlier blog posts, which can be found here and here, we wrote about the implications of Regulation 228/20 (the "Regulation"), enacted pursuant to the Employment Standards Act, 2000(the "ESA").  The Regulation states that non-unionized employees who had their hours reduced or eliminated due to COVID-19 are deemed retroactively to be on Infectious Disease Emergency Leave.  Section 7 of the Regulation states that a temporary reduction or elimination of an employee's work hours and/or wages due to COVID-19 will not constitute constructive dismissal during the "COVID-19 period", which currently lasts until July 3, 2021. 

The issue that remained unresolved was whether the Regulation also prevented an employee from advancing a claim for constructive dismissal at common law.

In general, for the common law to be altered by statute, there would need to be express language in the statute to that effect. 

In Coutinho, an employee was placed on temporary lay-off in May 2020 due to the closure of her workplace during the pandemic. The plaintiff commenced an action against the employer claiming damages for constructive dismissal at common law, along with punitive and aggravated damages. Relying on section 7 of the Regulation, the employer argued that the plaintiff was deemed to be on Infectious Disease Emergency Leave and that the temporary reduction of her duties and work hours did not constitute a constructive dismissal at common law.

The Ontario Superior Court was asked to consider whether a temporary reduction in hours of work and/or wages constitutes constructive dismissal at common law, despite the Regulation.

Scope of Regulation 228/20 under the ESA

The defendant argued that due to the unprecedented emergency caused by COVID-19, section 7 of the Regulation should be interpreted to apply not only to constructive dismissals for the purposes of the ESA  but also at common law. The Court found that the scope of section 7 of the Regulation must be interpreted with section 8(1) of the ESA which provides that "no civil remedy of an employee against his or her employer is affected by this Act." The Court determined that the scope of the Regulation was constrained by its enabling legislation and could not be interpreted in the same manner as a statutory provision.

In support of this interpretation, the Court considered an online publication of the Ontario Ministry of Labour, Training, and Skills Development, which states that the Regulation affects only what constitutes a constructive dismissal under the ESA and does not address what constitutes a constructive dismissal at common law.

Constructive Dismissal Under Common Law

While the Regulation precluded the plaintiff from pursuing damages under the ESA,  the Court determined that the Regulation did not prevent the plaintiff from pursuing a claim for constructive dismissal at common law. Under the common law, unless expressly stated in an employment contract, an employer does not have a right to temporarily lay off an employee, even if the employer complies with the provisions of the ESA. The Court found that the plaintiff was entitled to treat the company's unilateral imposition of the layoff as a termination at common law and therefore the employee had the right to sue for constructive dismissal.

This decision confirms that the Regulation to the ESA  has no effect on an employee's common law right to assert that a reduction in hours of work and/or wage constitutes a constructive dismissal, thus entitling them to wrongful dismissal damages. In light of the Court's ruling, many temporary layoffs due to COVID-19 could be considered unlawful and may entitle employees to damages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.