Canada: New Ontario Superior Court Decision Holds That COVID-19 Related Temporary Layoffs Do Not Amount To Constructive Dismissal At Common Law – Taylor V Hanley Hospitality Inc., 2021 ONSC 3135

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 ("IDEL"). 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 was  recently extended until September 25, 2021.

The issue that remained unresolved was whether the Regulation also prevented an employee from advancing a claim for constructive dismissal at common law. As discussed in our  previous blog about  Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076 (CanLII) ("Coutinho"), the Court determined that the Regulation did not prevent the plaintiff, who had been temporarily laid off during the COVID-19 period and was on deemed IDEL under the ESA 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 the right to temporarily lay off an employee, even if the employer complies with the provisions of the ESA. In accordance with Coutinho, many temporary layoffs due to COVID-19 could be considered unlawful and may entitle employees to damages.

However, in  Taylor v Hanley Hospitality Inc., 2021 ONSC 3135 ("Taylor"), the court came to the opposite conclusion.  In this case, an employee was placed on temporary lay-off in March 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.  The employer relied on Section 7 of the Regulation and argued that the employee was deemed to be on IDEL and that the temporary reduction of her duties and work hours did not constitute a constructive dismissal at common law.

The Ontario Superior Court of Justice was asked to again consider whether an employee who had been temporarily laid off due to COVID-19 and was on deemed IDEL under the ESA  had been constructively dismissed at common law.   

Constructive Dismissal at Common Law

In contrast to the decision in Coutinho, the Court in Taylor  determined that there was no constructive dismissal at common law.  The Court held that it was clear that the Regulation was enacted to displace the common law with respect to constructive dismissal and layoffs, since all temporary layoffs relating to COVID-19 are deemed to be IDELs, retroactive to March 1, 2020 until the end of the COVID-19 period.  As such, employees who were placed on IDEL were not constructively dismissed at common law.

The Court disagreed with the analysis in Coutinho, stating that Coutinho  failed to properly apply the principles of statutory interpretation. In particular, Coutinho had improperly interpreted Section 8(1) of the ESA to mean that the ESA may not displace the common law. The Court referred to the Court of Appeal's reasoning in  Elsegood v. Cambridge Spring Service (2001) Ltd., 2011 ONCA 831 (CanLII), in which the court expressly concluded that "Simply put, statutes enacted by the legislature displace the common law" and that it is incorrect to presume that the common law continues to operate independently of the ESA.

Conclusion

The decision in Taylor  is in direct conflict with Coutinho  and creates uncertainty as to whether employers would be liable at common law for constructive dismissal in relation to COVID-19. While Taylor  provides relief for employers that have relied upon IDEL, the decision leaves the state of the law ambiguous for constructive dismissal claims at common law.  It is very likely both of these decisions will be appealed and that the Court of Appeal for Ontario (the highest court in Ontario) will ultimately be asked to resolve this inconsistency in the law. 

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