Canada: Ontario Court Confirms That Employees Deemed To Be On Infectious Disease Emergency Leave Have Not Been Constructively Dismissed Under The Common Law

Many Ontario businesses have been forced to temporarily shutter their doors and layoff their employees due to operational restrictions resulting from the COVID-19 pandemic. In consideration of this, the Ontario Government introduced the Infectious Disease Emergency Leave ("IDEL") which, among other things, deemed non-unionized employees to be on a job-protected leave where their hours of work were temporarily reduced or temporarily eliminated for reasons related to COVID-19. Despite the wording of the legislation, employers are facing a barrage of constructive dismissal claims from employees that were or continue to be on IDEL. A recent decision out of the Ontario Superior Court of Justice (the "ONSC") brings some reprise to employers that have relied upon IDEL.

The Issue

In two recent ONSC decisions, employees who were placed on IDEL alleged that their employers had dismissed them under the common law concept of constructive dismissal. These allegations put two competing legal frameworks at issue: legislation enacted through parliament and the common law enacted through the judiciary. The Court was tasked with determining what impact, if any, IDEL has on the common law. 

The Legislation

In May of 2020, the Ontario government introduced O. Reg. 228/20: Infectious Disease Emergency Leave (the "Regulation"), an amendment under the Employment Standards Act  ("ESA"). The Regulation provides inter alia that a temporary reduction or elimination of an employee's hours of work for reasons relating to COVID-19 does not constitute constructive dismissal under the ESA, but rather the employee is deemed to be on IDEL. The leave had retroactive application to March 1, 2020, and is currently set to expire on September 25, 2021.

The Common Law

Constructive dismissal is a common law concept separate and apart from constructive dismissal under the ESA; it arose through decisions by the Court and not through legislation. Constructive dismissal is a deemed termination that occurs where there is a significant change to a fundamental term or condition of the employment agreement. A temporary reduction or elimination of hours could trigger constructive dismissal.

Case 1: Coutinho v. Ocular Health

Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, ("Coutinho"), was issued on April 27, 2021, providing clarity on the impact of IDEL on common law constructive dismissal. The Court distinguished between constructive dismissal under the ESA and common law constructive dismissal. Coutinho found that employees placed on IDEL could still be constructively dismissed pursuant to the common law, even though not constructively dismissed under the ESA. Accordingly, the Court awarded the employee damages for constructive dismissal despite the fact that she was on IDEL.

This decision was troubling for many employers who relied upon IDEL to protect them from constructive dismissal claims. Nonetheless, the decision brought some finality to the debate on whether employees on IDEL could be constructively dismissed under the common law.

Case 2: Taylor v. Hanley Hospitality Inc

On June 7, 2021, the ONSC issued Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135, ("Taylor"). In contradiction to Coutinho,  the Court dismissed the case, finding that employees who were placed on IDEL were not constructively dismissed under the common law.

The Court in Taylor found:

• that all temporary layoffs relating to COVID-19 are deemed to be IDELs. IDELs constitute statutory leaves of absence, and therefore any argument regarding the common law on layoffs is "inapplicable and irrelevant"¹;
• statutes enacted by the legislature displace the common law in cases involving constructive dismissals.
• the analysis in Coutinho is wrong in law, and therefore the ONSC is not bound by it.

Employer Takeaways

The wording of the Regulation created uncertainty regarding whether or not employers could be liable at common law for constructive dismissal where employees hours were temporarily reduced or eliminated in connection with COVID-19. Coutinho  was an upsetting decision for employers due to the potentially large cost consequences of constructive dismissal claims, but nonetheless provided clarity on the impact IDEL has on the common law. The Court's contradictory decision in Taylor leaves the state of the law ambiguous.

It is likely that one or both of these decisions will be appealed, and a higher court will provide greater certainty on the state of the law. We will continue to monitor the issue and provide updates.

Footnote

1 Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135 at para 19.

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