Canada: Ontario Court Finds Temporary Layoffs Due To COVID-19 Are Not Constructive Dismissal At Common Law

In a recent decision, Taylor v. Hanley Hospitality Inc., 2021 ONSC 3135 ("Taylor"), Justice Ferguson of the Ontario Superior Court of Justice held that an employee who was temporarily laid off due to COVID-19 was not constructively dismissed at common law. The Court held that regulations made under Ontario's Employment Standards Act, 2000 in response to COVID-19 have displaced the common law doctrine of constructive dismissal in relation to temporary layoffs.

Background

Traditionally, where there is no contract term, policy or past practice providing for temporary layoffs, an employer risks triggering a constructive dismissal if it temporarily lays off an employee. In such cases, the employee may argue that the layoff breached a fundamental term of employment and that they, therefore, have a right to treat the employment contract at an end and claim damages for its breach.

When disruptions caused by COVID-19 forced many businesses to implement layoffs, the Ontario government introduced temporary measures under Ontario's Employment Standards Act, 2000 (the "ESA"). Pursuant to Ontario Regulation 228/20 (the "IDEL Regulation"), during the "COVID-19 period,"¹ employees are "deemed" to be on a job-protected Infectious Disease Emergency Leave ("IDEL") when their hours of work are temporarily reduced or eliminated by their employer for reasons related to COVID-19. Significantly, the regulation also provides that the reduction or elimination of an employee's hours of work for reasons related to COVID-19 does not constitute constructive dismissal.

Facts and Analysis

The facts of Taylor are straightforward. The plaintiff was an employee at a Tim Hortons franchise. Due to the pandemic, the employer was forced to close its store, other than a small drive through operation, and lay off many of its employees in March 2020. This included the plaintiff, who was laid off on March 27, 2020 and recalled to work on August 18, 2020.

The plaintiff took the position that she had been constructively dismissed. She argued that the IDEL Regulation did not displace the common law doctrine of constructive dismissal.

Justice Ferguson disagreed, finding that the employee had not been constructively dismissed. The Court was guided by practical considerations as to the government's reason for introducing IDEL and the challenges faced by businesses during the pandemic. In the Court's view, the Legislature had forced employers to lay off employees when it ordered businesses to curtail or cease their operations due to the pandemic; in doing so, the Legislature exposed employers to claims of common law constructive dismissal. To avoid these consequences, the legislature amended the ESA to create IDEL, solving a problem it had created through its own action. The Court's view was that "it should be obvious to the world what the legislature's intention was" and that, conversely, it would offend the rules of statutory interpretation to ascribe an interpretation that rendered the legislation meaningless by holding that the IDEL Regulation did not displace the common law.

In the Court's view, nothing in the ESA prevents the statute from displacing the common law. The plaintiff relied on section 8 of the ESA, which provides that no civil remedy of an employee against their employer is affected by the ESA. The Court found that section 8(1) of the ESA simply establishes that it is not the exclusive forum for resolving disputes - employees continue to be able to seek redress through the courts. Further, the Court held that the common law should evolve as changing times require. Accordingly, the IDEL Regulation made under the ESA could, and did, displace the common law, so the employee was not constructively dismissed when she was temporarily laid off during the COVID-19 period.

Conclusion

This decision is reassuring to the many employers who were forced to implement temporary layoffs in response to the pandemic. The decision reflects a keen awareness of the practical challenges employers have faced as a result of long-term closure orders and ongoing operational restrictions.

However, it should be noted that the Court's decision runs counter to an April 2021 decision of the Ontario Superior Court in Coutinho v. Ocular Health Centre Ltd., 2021 ONSC 3076, where the Court decided that an employee who was temporarily laid off during the COVID-19 period was constructively dismissed at common law. In that case, the Court drew a distinction between the statutory concept of constructive dismissal in the ESA and common law constructive dismissal. The Court held that while the IDEL Regulation precluded the operation of constructive dismissal under the ESA, it did not bar the employee from bringing a claim against her employer for constructive dismissal at common law.

In light of these opposing decisions and their importance to employers and employees alike, this issue is likely to be the subject of future litigation. We will continue to provide updates as they become available.

Footnotes

1. Currently March 1, 2020 to September 25, 2021.

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